Which of the following factors indicate that the functional currency of a foreign operation is that of the reporting entity?
A) The activities of the foreign operation are carried out as an extension of the activities of the reporting entity rather than being carried out with a significant degree of autonomy.
B) Transactions with the reporting entity are a high proportion of the activities of the foreign operation.
C) The day-to-day financing of the foreign operation is supplied by the reporting entity and the cash flows of the foreign operation directly affect the cash flows of the reporting entity.
D) All of the above.

Question

Quizplus · Accepted Answer

All three factors indicate that the functional currency of the foreign operation is that of the reporting entity. The activities being an extension of the reporting entity, high proportion of transactions with reporting entity, and day-to-day financing supplied by the reporting entity all suggest that the foreign operation is closely tied to the reporting entity and therefore likely to have the same functional currency.

Which of the Following Factors Indicate That the Functional Currency