VX Inc. is a Canadian-based investment company that seeks to provide investor returns through strategic investments of companies offering remote based services and other online services.

VX completed its initial public offering (IPO) on January 1, 2020 and begun its operations on that date. The Company trades on the TSX Venture and therefore reports under IFRS. VX is effectively a shell company that raises capital through share issuances in CAD from Canadian investors. The general and administrative costs incurred by VX are all incurred in CAD. VX's presentation currency is the CAD.

Today is August 1, 2020. You have recently joined VX as the new VP Finance. Your first major task is to assist WFI with the June 30, 2020 interim financial statements for reporting purposes. The major accounting considerations have yet to be made for the investments and transactions below.

Finn's Inc. ("FI")

On January 1, 2020, VX purchased 10,000,000 common shares of Finn's Inc (FI) for $10,000,000 USD. FI also issued $5,000,000 USD of convertible debt to VX USD. Each $1 USD of convertible debt can be converted for 1 common share at an exercise price of $0.90 USD.

FI provides remote based conference services to customers. FI was wholly owned by two shareholders before the VX purchase.

With this share purchase, VX obtained 4 of the 7 seats on the board of directors. 1 of the remaining seats is held by the CEO of Mega Corp. ("MC"), 2 of the remaining seats are held by the other two owners who hold the remaining 12,000,000 shares.

The reason VX purchased the shares of FI, was because it expects to direct the relevant activities of FI in the future. VX also plans on providing additional funding to FI in the future for improvements in its technology.

Once FI is cash flow positive, FI plans on declaring monthly distributions of dividends to be used as returns for the investors of FI.

The following is a copy of the draft statement of financial position of FI.

Finn Inc

Statement of Financial Position

January 1, 2020

(In USD)

Book Value Fair Value

Current Assets 1,000,000 1,200,000

Current Liabilities 600,000 700,000

Ordinary Shares 300,000

Retained Earnings 100,000

A business valuator (CBV) has estimated the fair values that were not recorded on the accounting records. The CBV has valued FI's brand at a fair value of $3,000,000 USD, with an indefinite useful life. The brands have both been legally trademarked. FI's workforce has been valued at $1,000,000 USD. FI has a patent for its web-conferencing technology. This technology is utilized to generate subscription revenue. The patent has a legal life of 25 years, and the CBV estimates that the technology will be obsolete in 5 years. The patent has an estimated value of $5,000,000 USD.

FI is headquartered in Vancouver, British Columbia. Most of its customers pay in USD. The Company's payroll costs are entirely paid in CAD. FI's operating costs are in USD other than its rent costs.

Mega Corp. ("MC")

VX purchased 15% of the shares of Mega Corp. (MC) on February 1, 2020 for $1,000,000. MC manufacturers high quality webcams for business and individual consumers.

VX purchased the shares of MC to develop strategic partnerships with its other future technology investments.

VX's Chief Operating Officer joined the board of MC and is also acting as the Chief Operating Officer for MC until the Company finds a suitable full time Chief Operating Officer.

MC generated an income of $25,000 from February 1, 2020 to June 30, 2020, this came to a surprise to the management of VX, as VX was expecting a much stronger performance, especially with the increased prospect of sales due to COVID-19. VX is a private company, therefore no share data is available, however VX management believes it has significantly overpaid for the MC shares.

VX is considering purchasing the remaining 85% of shares of MC at a lower price per share to help turnaround operations in the future. The sale of webcams is distinctly different than conference services provided by FI, and the CEO would be monitoring this performance separately.

Required:

1) Please provide the relevant accounting treatment for the two transactions above. Your discussions should use the case facts and the appropriate technical accounting guidance and should be quantified when possible.

2) Please discuss if VX can use a CAD presentation currency. Please discuss the functional currency of VX. and its controlled entities.