Indicators pointing towards the local overseas currency as the functional currency include:
I. Parent's cash flows are directly affected on a current basis.
II. Production costs are determined primarily by local conditions.
III. Sales prices are primarily responsive to exchange rate changes in the short-term.
IV. Cash flows are primarily in the local currency and do not affect the parent's cash flows.
A) II and IV only.
B) I and III only.
C) I, III and IV only.
D) I, II and IV only.

Question

Quizplus · Accepted Answer

II and IV are indicators of the local currency being the functional currency because they show that the subsidiary's operations are primarily influenced by the local environment and economy.

Indicators Pointing Towards the Local Overseas Currency as the Functional