A factor to be considered in determining a foreign unit's functional currency is whether sales are to the parent company versus unrelated customers located in the United States.

Question

Quizplus · Accepted Answer

The functional currency of a foreign entity is determined based on the primary economic environment in which it operates. Factors considered include the currency that mainly influences sales prices for goods and services and the currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services. Sales to the parent company versus unrelated customers, especially if these sales are significant and in a specific currency (e.g., USD for U.S. customers), can influence the determination of the functional currency.

A Factor to Be Considered in Determining a Foreign Unit's