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S Ltd is India-based, imports motorcycles from US in USD, sells in India to corporates (USD-invoiced for hedging) AND private customers (INR-invoiced). Operating expenses in India in INR. USD prices in India differ from other countries. Customer base 70% corporate / 30% private. Functional currency?
AUSD because corporate billing is in USD
BUSD because purchases are USD
CINR — sales prices in India are economically influenced by the Indian market (USD prices differ across geographies); private sales are in INR; competitive forces in India; operating costs all in INR; only hedge-driven corporate invoicing is in USD but not economically determined
DEUR (neutral base)
Answer & Solution
Correct answer: C. INR — sales prices in India are economically influenced by the Indian market (USD prices differ across geographies); private sales are in INR; competitive forces in India; operating costs all in INR; only hedge-driven corporate invoicing is in USD but not economically determined
Distinguish ECONOMIC influence on prices from invoice currency. USD invoicing to corporates is hedging convenience, not economic determination. Sales prices in India are determined by Indian competition and INR cost base. Functional currency = INR.
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