How do you determine a subsidiary's functional currency under IAS 21, and why does it matter more than the presentation currency?

Functional currency is the currency of the primary economic environment in which the entity operates — determined by primary indicators first: the currency that mainly influences sales prices and the currency of the country whose competition/regulation determines prices, and the currency that mainly influences labour, material and other costs. If those are mixed, secondary indicators are weighed: the currency in which financing is raised and in which operating receipts are retained, and (for a subsidiary) the degree of autonomy from the parent versus being an extension of it. It's a matter of fact, not choice. It matters more than presentation currency because functional currency drives the measurement and translation method: transactions are recorded in functional currency, monetary items retranslated with FX gains/losses in P&L, whereas presentation currency is just the reporting display (you translate into it for the group, with differences in OCI/translation reserve). Get functional currency wrong and you mis-measure FX results throughout; presentation currency is a cosmetic, reversible choice.