FASB No. 52, Foreign Currency Translation, essentially gives to management of a multinational enterprise the responsibility for determining the functional currency of the enterprises foreign branches, divisions, and subsidiaries.

Required

Given that remeasurement from a local currency to the functional currency produces foreign currency transaction gains and losses displayed in the enterprises income statement, while translation from the functional currency to the reporting currency generates foreign currency translation adjustments currently displayed as other comprehensive income and presented in the stockholders equity section of the balance sheet, is there any incentive for management to determine that the local currency of a foreign entity is not its functional currency? Explain.