Earlier this year, Alltime Company $($headquartered in Kansas City, Missouri$)$ acquired a small watch manufacturer in Berlin, Germany, that keeps its books in euros. $($This is the first foreign direct investment made by Alltime.$)$ The end of the fiscal year is approaching, and Alltime$$s CFO is beginning to plan for the financial statement consolidation of the German subsidiary. The CFO has heard that Alltime must determine the $$functional currency$$ of the foreign subsidiary to be able to comply with U$.$S$.$ GAAP. The CFO has asked you to provide answers to the following questions:

$1.$ What is the functional currency of a foreign subsidiary?

$2.$ Why must the functional currency of a foreign subsidiary be determined?

$3.$ How is the functional currency of a foreign subsidiary determined?