Page 413 - SBR Integrated Workbook STUDENT S18-J19
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Answers
Chapter 7
Example 1
Functional currency
Maior operates with autonomy and so its functional currency must be
assessed separately from its parent.
The sales prices for the Maior’s golf equipment are determined by local legal
and business conditions in yen. The yen is the currency in which those sales
prices are denominated and settled.
The yen is also used to pay the major operating costs.
Although Maior sometimes imports and sells its parent’s products, this is only
a small part of its business activity. Some transactions are undertaken with
China but these are relatively small.
Thus without evidence to the contrary, the yen is the functional currency of
Maior and Maior need not consider the secondary factors.
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