In contrast, if the foreign subsidiary functions as a freestanding enterprise that engages in manufacturing and /or providing services within the foreign contry, pays for most of its costs in the local currency, receives proceeds form sales and services in the local currency ,and rolls these amounts back into the subsidiary operations, economically the subsidiary dose not function as a channel for the parent’s operations. The functional currency in this case is the subsidiary’s local currency, and the current rate method would be used to translate the financial statements.