Question
A British parent firm which makes construction equipment has an Irish subsidiary which is 100% owned by the parent company. The Irish subsidiary provides all
A British parent firm which makes construction equipment has an Irish subsidiary which is 100% owned by the parent company. The Irish subsidiary provides all of the hydraulic parts used in the parent's construction equipment and the parent has no other supplier relationships. The Irish subsidiary's financial statements are stated in Euros and the subsidiary's functional currency is the Euro. At year end, when the parent is consolidating its financial statements, what method should the parent use?
A. Under US GAAP, since the subsidiary financial statements are stated in the local currency and the local currency is the functional currency, the current rate method should be used.
B. Under International Accounting Standards, the Irish subsidiary is an integrated entity and the parent should use the current rate method.
C, Under International Accounting Standards, the Irish subsidiary is an integrated entity and the parent should use the temporal method.
D. Under US GAAP, since the subsidiary financial statements are stated in the local currency and the local currency is the functional currency, the temporal method should be used.
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