A. In accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates, the following factors should be considered first in determining an entity's functional currency: 1. T 2. T F The currency (a) that mainly influences sales prices for goods and services and (b) of the country whose competitive forces and regulations mainly determine the sales price of its goods and services. F 3. T F Whether operating cash flows generated by the foreign operation are sufficient to service existing and normally expected debt or whether the foreign entity will need funds from the parent to service its debt. The currency that mainly influences labor, material, and other costs of providing goods and services. B. If the factors listed above (as appropriate) are mixed and the functional currency is not obvious, the following secondary factors must be considered: 4. T 5. T F The currency in which receipts from operating activities are usually retained. F Whether the activities of the foreign operation are an extension of the parent's or are carried out with a significant amount of autonomy. 6. T F Whether transactions with the parent are a large or a small proportion of the foreign entity's activities. 7. T F Whether cash flows generated by the foreign operation directly affect the cash) flow of the parent and are available to be remitted to the parent. 8. T F The currency in which funds from financing activities are generated.