Monday Inc is a wholly 100% subsidiary to Malaysian company, Blue Bhd. Monday Inc is located in a foreign country and operates a mine. The income of Monday Inc is denominated and settled in dinars. The output of the mine is routinely traded in dinars and its price is determined initially by local supply and demand. Monday pays 30% of its costs and expenses in dollars with the remainder being incurred locally and settled in dinars. Monday’s management has a considerable degree of authority and autonomy in carrying out the operations of Monday and is not dependent upon group companies for finance. Required: Discuss and apply the principles set out in MFRS 121 The Effects of Changes in Foreign Exchange Rates in order to determine the functional currency of Monday Inc.
Monday Inc is a wholly 100% subsidiary to Malaysian company, Blue Bhd. Monday Inc is located in a foreign country and operates a mine. The income of Monday Inc is denominated and settled in dinars. The output of the mine is routinely traded in dinars and its price is determined initially by local supply and demand. Monday pays 30% of its costs and expenses in dollars with the remainder being incurred locally and settled in dinars. Monday’s management has a considerable degree of authority and autonomy in carrying out the operations of Monday and is not dependent upon group companies for finance.
Required: Discuss and apply the principles set out in MFRS 121 The Effects of Changes in Foreign Exchange Rates in order to determine the functional currency of Monday Inc.
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