Is it true or false – Sometimes Canadian companies will report their results in U.S. dollars?
The correct answer and explanation is:
Correct Answer: True
Explanation:
It is true that sometimes Canadian companies report their financial results in U.S. dollars (USD) instead of Canadian dollars (CAD). This practice is particularly common for companies that do a significant portion of their business outside Canada, especially in the United States or in international markets where the U.S. dollar is a dominant currency.
Why Would a Canadian Company Report in U.S. Dollars?
- International Business Operations:
Companies with significant sales, purchases, or operations in the U.S. or globally may choose to report in U.S. dollars to better reflect their business performance. For example, a Canadian mining company that sells minerals on international markets, which often use USD pricing, may find it clearer and more relevant to report in USD. - Stability and Comparability:
The U.S. dollar is considered a stable and widely accepted global currency. Reporting in USD can make financial statements easier for global investors and stakeholders to understand and compare across borders. - Investor Preferences:
Many Canadian companies are listed not only on the Toronto Stock Exchange (TSX), but also on U.S. exchanges such as the New York Stock Exchange (NYSE) or NASDAQ. In such cases, reporting in USD may be more attractive to U.S. investors who prefer to analyze financial data in their own currency. - Functional Currency:
Under International Financial Reporting Standards (IFRS), which Canadian public companies follow, businesses are allowed to choose a “functional currency” for financial reporting. If the USD is the main currency in which a company earns and spends money, then it can be designated as the functional currency—even for a Canadian company.
Conclusion:
So, while Canadian companies are based in Canada and use CAD in day-to-day operations, they may legitimately and strategically report in U.S. dollars based on the nature of their business and international investor interests.