Question

Question 2 Which of the following is an additional question to be asked in determining whether a foreign entity’s functional currency is the same as that of the reporting entity? Are the foreign operation’s activities carried out as an extension of the reporting entity, rather than being carried out with a significant degree of autonomy? Do the cash flows from the foreign operation’s activities directly affect the reporting entity’s cash flows? All of the above. Are the transactions with the reporting entity a high or low proportion of the foreign operation’s activities?

Answer 1

Solution: All of the above

Explanation: Foreign currency refers to a currency other than the functional currency of the business. To ensure that functional currency of foreign entities is the same as that of the reporting entity, the additional questions include:

-- the foreign operation's autonomy from reporting entity;

-- the transactions level among the two entities;

-- whether the foreign operation entity's cash flows are enough to meet the requirements of cash;

-- whether the cash flow impact directly on the entity