When the Functional Currency Is Being Determined for a Foreign

question 19

Multiple Choice

When the functional currency is being determined for a foreign operation (i.e. a subsidiary, branch, associate or joint venture, of a parent entity) , in addition to the primary and secondary indicators, all of the following factors should be considered in this determination EXCEPT

• A)Whether the foreign operation's activities are relatively autonomous of those of the parent entity or whether they are carried out as an extension thereof.
• B)The currency in which funds from financing activities are generated.
• C)Whether transactions with the parent entity are a high or a low proportion of the foreign operation's activities.
• D)Whether cash flows from the foreign operation's activities directly affect the cash flows of the parent entity and whether they are readily available for remittance to it.

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Definitions:

Note Payable

A written promise to pay a specified amount of money, along with interest, by a certain date, often used for loans or credit extended by a lender.

Maturity

The date on which the principal amount of a financial instrument, such as a bond or loan, becomes due and payable.

Face Value

The nominal or original value of a financial instrument as stated by its issuer.

Face Value

The nominal or original value of a security or financial instrument as stated by the issuer.