CERTYNEX IFRS ACADEMY

The Calvet group holds a foreign subsidiary. The finance director writes: "The parent has the franc as functional currency, so the subsidiary necessarily has the franc as functional currency." The subsidiary has its own financing, enters into few transactions with the parent and its cash flows do not affect those of the parent. What is the error?

A subsidiary cannot have the same functional currency as its parent, whatever its autonomy and its financing.

The subsidiary's functional currency must be the currency of the country where it is located, with no further analysis of its activities or its financing.

The subsidiary's functional currency must be decided by the parent, according to its consolidation needs, regardless of the facts.

The subsidiary's functional currency is judged on its autonomy, its dealings with the parent, cash flows and financing, not by deduction.