OVS operates in country G, which has the Grum as its currency. OVS sources all raw materials

Question:

OVS operates in country G, which has the Grum as its currency. OVS sources all raw materials locally and is subject to local taxes and corporate regulations. The current workforce is recruited locally, although the majority of its sales are to customers from neighbouring countries. OVS has operated autonomously since being acquired by JK and during the year raised a significant amount of finance from the main bank in G to fund its own investment requirements.


Required:

In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates:

(i) Explain the key factors which determine an entity’s functional currency and using these factors identify the functional currency of OVS

(ii) Explain how the financial statements of OVS will be translated into dollars prior to preparing the consolidated accounts of JK Group. JK holds 100 per cent of the ordinary shares of OVS.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

International Financial Reporting And Analysis

ISBN: 9781473766853

8th Edition

Authors: David Alexander, Ann Jorissen, Martin Hoogendoorn

Question Posted: