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Sterling functional currency and non-sterling presentation currency

These provisions apply only to UK companies that are not investment companies, with separate provisions applying to UK resident investment companies.

Where a UK resident company identifies sterling as its functional currency and prepares its accounts in a non-sterling currency (presentational currency), it will be required to determine its profits or losses that fall to be computed in accordance with GAAP as if its accounts had been prepared in sterling¹. A company's functional currency, in the present context, is defined as the currency of the primary economic environment in which the company, or part of the company's business, operates².

There are provisions to cover cases where a company's functional currency changes from sterling to another currency and these apply where:

1. Ìý

   •ÌýÌýÌýÌý A sterling loss is carried forward³ to a future period and the company's functional currency in that future period is no longer sterling⁴. In such cases the sterling loss must be translated into the company's new functional currency