Functional Currency

A Singaporean operation is a wholly owned subsidiary of an Australian company which regards the operation as a long term investment, and thus takes no part in the day to day decision making of the operation. The operation purchases parts from various Australian manufacturers for assembly by Singaporean labour. The finished product is exported to a number of countries but Singapore is still the major market. Consequently, sales price is dominated by competition within Singapore and follows the local regulations in Singapore.

Required

Using AASB121 highlight and explain the factors that will determine the functional currency? Is it Singaporean or Australian dollars?

NOTE: This references to Financial Accounting