In accordance with IAS 21, the functional currency is defined as the currency of the primary economic environment in which the entity operates. The determination of the functional currency should consider several factors, particularly the currency that:

• Mainly influences the entity’s sales prices for goods and services;
• Mainly influences labor, material, and other costs of providing goods or services.

For Sunyani Ltd, the following considerations are crucial in determining its functional currency:

1. Currency of Sales and Purchases: All of Sunyani Ltd’s sales and purchases are invoiced in Ghana Cedis (GH¢). Therefore, the GH¢ mainly influences the revenue generation and cost structure of Sunyani Ltd.
2. Cash and Finance: Sunyani Ltd retains cash receipts in GH¢ and raises most of its finance in GH¢. This indicates that the GH¢ is used for financial transactions and cash management.
3. Autonomy from Parent: Sunyani Ltd has a high degree of autonomy from Hamma Ltd and is not reliant on it for sales or finance. Sunyani Ltd does not have significant transactions in dollars, and it does not operate a dollar bank account. This further supports the conclusion that the Ghana Cedi (GH¢) should be considered as the functional currency.
4. Staff Payments: While some staff are paid in dollars, this does not outweigh the fact that Sunyani Ltd’s primary economic activities, including sales, purchases, and taxes, are conducted in GH¢.
5. Legal Requirements: Sunyani Ltd is required to pay taxes on its profits in GH¢, which further supports the Ghana Cedi as the functional currency.

In conclusion, based on IAS 21, the Ghana Cedi (GH¢) should be considered the functional currency of Sunyani Ltd, as it is the currency of the primary economic environment in which the company operates.