Functional Currency

The entity’s functional currency is the currency of the primary economic environment in which the entity operates. The factors considered in determining the functional currency of the entity, and whether its functional currency is the same as that of the reporting entity include the following: 

  • Activities of the entity are carried out as an extension of the reporting entity, rather than being carried out with a significant degree of autonomy;  
  • Transactions with the reporting entity are a high or a low proportion of the foreign operation’s activities; 
  • Cash flows from the activities of the foreign operation directly affect the cash flows of the reporting entity and are readily available for remittance to it; and 
  • Cash flows from the activities of the foreign operation are sufficient to service existing and normally expected debt obligations without funds being made available by the reporting entity. 

Comments

Post a Comment

Popular posts from this blog

Estimating useful lives of non-financial assets

The estimated useful lives of property and equipment are annually reviewed based on the period over which the assets are expected to be available for use and are updated if expectations differ from previous estimates due to physical wear and tear or technical and commercial obsolescence. The entity's management determines the estimated useful lives of its property and equipment based on the period over which the assets are expected to be available for use. The entity annually reviews the estimated useful lives of property and equipment based on factors that include asset utilization , internal technical evaluation, technological changes, environmental and anticipated use of assets tempered by related industry benchmark information. It is possible that future results of operations could be materially affected by changes in these estimates brought about by changes in factors mentioned.  
Read more

Net realizable value (NRV) of inventories

Inventories are carried at NRV whenever the utility of it becomes lower than cost due to damage, physical deterioration, obsolescence, changes in price levels or other causes (i.e., pre-termination of contracts). The estimate of the NRV is reviewed regularly. Estimates of NRV are based on the most reliable evidence available at the time the estimates are made on the amount the inventories are expected to be realized.  These estimates take into consideration fluctuations of price or cost directly relating to events occurring after reporting date to the extent that such events confirm conditions existing at reporting date.  The allowance account is reviewed periodically to reflect the accurate valuation in the financial records.  
Read more

Leases

Entity as Lessee   The entity assesses whether a contract is or contains a lease, at inception of the contract. The entity recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the entity recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.     The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined , the lessee use...
Read more