Discuss which currency is the functional currency of the foreign entity.

| February 14, 2018

Discuss which currency is the functional currency of the foreign entity.An Indonesian operation manufactures a product using Indonesian materials and labour. Patented processes and operations staff are supplied by its Australian parent. Reimbursement invoices for these services are denominated in Indonesian rupiah. The product is sold in the Malaysian market at a price, denominated in in rupiah that is determined by competition with similar locally produced products. The Indonesian operation remits all revenue to the Australian parent, retaining only sufficient cash to meet wages and day-to-day operating costs. The receipt of cash from the Indonesian operation is important to the parent’s cash management function. Long-term financing is arranged and serviced by the parent.

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