The impact of financing in determining the functional currency is that
A)financing does not impact the choice of functional currency due to the integrated nature of capital markets.
B)if the financing of the foreign entity is primarily denominated in the foreign currency and the debt service obligations are normally handled by the foreign entity,the functional currency is the foreign currency.
C)if the financing of the foreign entity is primarily from the parent,with debt service obligations are normally handled by the parent,the functional currency is the home currency.
D)if the financing of the foreign entity is primarily denominated in the foreign currency and the debt service obligations are normally handled by the foreign entity,the functional currency is the foreign currency.Additionally,if the financing of the foreign entity is primarily from the parent,with debt service obligations are normally handled by the parent,the functional currency is the home currency.

Question

Quizplus · Accepted Answer

The financing structure plays a key role in determining the functional currency. If the financing of the foreign entity is in the foreign currency and debt service obligations are handled by the foreign entity, then the functional currency is the foreign currency. However, if the parent company provides the funding and handles debt service obligations, the functional currency would be the home currency. Therefore, D is the correct answer as it mentions both financing scenarios.

The Impact of Financing in Determining the Functional Currency Is