Foreign Currency Translation – IAS 21 & ASPE

Charli Confectionary Co. (Charli) is a Canadian specialty bakery that reports under IFRS. It recently acquired PieGo, a manufacturing facility in Southeast Asia that will ship frozen treats to Charli’s customers worldwide. After the acquisition:

• The cost to manufacture products was reduced by 60%. PieGo employs primarily local residents.

• There was no change to the ordering process; customers order from Charli’s website.

• The Canadian Food Inspection Agency required PieGo to undergo a third-party certification to ensure that goods complied with Canadian standards.

• PieGo started to lease out equipment contributing to excess capacity.

Which of the following factors is the LEAST important when determining PieGo’s functional currency?

The currency of the funds received from leased assets

Which of the following best describes functional currency?

The currency of the primary economic environment in which the entity operates

Which of the following is a primary factor to consider when determining functional currency?

Currency influencing sales prices for goods and services

Which of the following best describes an entity’s presentation currency?

The currency in which an entity reports its financial results

In the translation of foreign currency, which of the following best describes a foreign operation?

A subsidiary, associate, joint venture or branch in a company whose activities are based or conducted in a country or currency difference from that of the reporting company

A parent company that reports under IFRS is determining the functional currency of its subsidiary. Which one of the following is an additional factor that supports the subsidiary having the same functional currency as the parent?

The activities of the foreign subsidiary are carried out as an extgension of the parent