Question
Oz Hats Ltd manufactures hats including farm-style Australian hats that it sells in Australia and overseas markets. Oz Hats Ltd has established a wholly owned
Oz Hats Ltd manufactures hats including farm-style Australian hats that it sells in Australia and overseas markets. Oz Hats Ltd has established a wholly owned subsidiary in the US to distribute its product in this market. The US subsidiary is financed by the parent entity.
The US subsidiary purchases hats from the Australian parent, but then modifies the design in the US making it suitable to market there. All design and marketing decisions are made by the US subsidiary. The finished product is sold in the US with sales prices determined by competition within the US. All profits are retained in the US for expansion purposes.
Based on the above information, discuss which currency is the functional currency of the US subsidiary.
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