A U.S. parent has a subsidiary located in Hong Kong. In which situation will the U.S. parent remeasure the accounts of the subsidiary from Hong Kong dollars to U.S. dollars?

Question

Quizplus · Accepted Answer

Remeasurement from the local currency (Hong Kong dollars) to the reporting currency (U.S. dollars) is necessary when the functional currency is not the local currency but rather the reporting currency. This typically happens in hyperinflationary economies. Therefore, if the level of inflation in Hong Kong is extremely high, it would necessitate remeasurement to the U.S. dollar.

A US Parent Has a Subsidiary Located in Hong Kong