Which of the following statements regarding the functional currency under US GAA

Question

Which of the following statements regarding the functional currency under US GAAP is least accurate?

A)Self-contained, independent subsidiaries whose operations are primarily located in the local market will use the local currency as the functional currency.

B)The functional currency is defined as the primary currency of the economic environment in which the parent firm operates.

C)If a firm operates in a country or environment which is subject to cumulative inflation of 100% or more over a three year period, that firm will use the parent's currency as the functional currency.

A)Self-contained, independent subsidiaries whose operations are primarily located in the local market will use the local currency as the functional currency.

B)The functional currency is defined as the primary currency of the economic environment in which the parent firm operates.

C)If a firm operates in a country or environment which is subject to cumulative inflation of 100% or more over a three year period, that firm will use the parent's currency as the functional currency.

Explanation / Answer

Option B

The functional currency is defined as the primary currency of the economic environment in which the foreign subsidiary and not the parent firm operates.

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