A foreign subsidiary's functional currency is its local currency and inflation of over 100 percent has been experienced over a three-year period. For consolidation purposes, SFAS No. 52 requires the use of:

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SFAS No. 52 specifies that when a foreign subsidiary operates in a highly inflationary environment (defined as cumulative inflation of approximately 100% or more over a three-year period), the temporal method should be used for translation. This method uses the exchange rates at the dates of the transactions for monetary items and historical rates for non-monetary items.

A Foreign Subsidiary's Functional Currency Is Its Local Currency and Inflation