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Additional factors specific to a FOREIGN OPERATION (subsidiary, branch, associate, JV) in determining whether its functional currency is the SAME as the reporting entity's include:
AWhether activities are an EXTENSION of the reporting entity or significantly AUTONOMOUS; (b) Proportion of transactions with reporting entity; (c) Cash flows directly affecting reporting entity / available for remittance; (d) Ability to service its own debt without parent funding
BCountry of incorporation alone
COnly the regulatory environment of the foreign jurisdiction
DWhether the foreign operation is consolidated under Ind AS 110
Answer & Solution
Correct answer: A. Whether activities are an EXTENSION of the reporting entity or significantly AUTONOMOUS; (b) Proportion of transactions with reporting entity; (c) Cash flows directly affecting reporting entity / available for remittance; (d) Ability to service its own debt without parent funding
Ind AS 21 paragraph 11: four extra-factor tests for foreign operations. Extension vs autonomy, proportion of intra-group transactions, cash flow dependency, self-financing capability. Together these determine if the foreign operation 'inherits' the parent's functional currency or has its own.
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