Which of the following defines a foreign-based entity that uses a functional currency different from the recording currency?

1. I. A U.S. subsidiary in Britain maintains its accounting records in pounds sterling, with the majority of its transactions denominated in pounds sterling.
2. II. A U.S. subsidiary in Peru conducts virtually all of its business in Latin America, records transactions in the respective local currencies, and uses the U.S. dollar as its major currency.

Multiple Choice

• Neither I nor II.

• I.

• Both I and II.

• II.