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- 2011-7-11
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International Operations: functional currency definition
I came across the following question that to me implies that the term 'functional currency' can refer to the parent or the subsidiary(ies). I somehow thought that there was only one functional currency in any one example and it would apply to the entire company. The answer below, A, I guess implicitly refers to the functional currency of the subsidiary. Since this functional currency (or LC) does not equal USD, then we have the current rate method. Likewise, answer C seems to imply the same, i.e. functional currency does not equal USD so that current rate method is required. Can anyone weigh in as to what I could be misunderstanding?
Which of the following is least likely a condition that requires the use of the
temporal method for a U.S. parent that reports results in U.S. dollars?
A. T he functional currency is the local currency.
B. T he foreign subsidiary is operating in a highly inflationary economy.
C. T he functional currency is some currency other than the local currency or
the U.S. dollar.
Ans: A, If the functional currency is the local currency, then the functional currency and the
parent’s presentation currency are different. In this case, the current rate method is used. |
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发表于 2011-7-11 19:30
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