An Indonesian operation manufactures a product using Indonesian materials and labour. Patented processes and senior operations staff are supplied by its Australian parent. Reimbursement invoices for these services are denominated in Australian dollars. The product is sold in the Australian market at a price, denominated in Australian dollars, that is determined by management based on competition with similar locally produced products. The Indonesian operation remits all revenue to the Australian parent, retaining only sufficient cash to meet wages and day-to-day operating costs. The receipt of cash from the Indonesian operation is important to the parent's cash management function. Long-term financing is arranged and serviced by the parent.The Australian parent's presentation currency is the Australian dollar.

Required:

In relation to this case, identify and explain in detail which currency is the functional currency of the foreign entity.Identify (but do not explain) which translation process would be required so that the Indonesian operation can be included in the consolidated financial statements of the Australian parent.