Questions from International Accounting

Q: Explain how a company might use a currency swap to hedge its

Explain how a company might use a currency swap to hedge its foreign exchange risk on a foreign currency borrowing.

Q: What is a financial futures contract? How does it differ from

What is a financial futures contract? How does it differ from a forward exchange contract?

Q: Identify three major types of hedges recognized by IAS 39 and FAS

Identify three major types of hedges recognized by IAS 39 and FAS 133 and describe their accounting treatments.

Q: All hedging relationships must be “highly effective” to qualify for

All hedging relationships must be “highly effective” to qualify for special accounting treatment. What is meant by the term highly effective and why is its measurement important for financial managers...

Q: The notion of an “opportunity cost” was perhaps first introduced

The notion of an “opportunity cost” was perhaps first introduced to you in your first course in microeconomics. Explain how this notion can be applied in evaluating the effectiveness of FX risk hedgin...

Q: Consider the following statements by David Cairns, former secretary-general

Consider the following statements by David Cairns, former secretary-general of the International Accounting Standards Committee.26 When we look at the way that countries or companies account for part...

Q: What is market risk? Illustrate this risk with a foreign exchange

What is market risk? Illustrate this risk with a foreign exchange example.

Q: Your company has just decided to purchase 50 percent of its inventory

Your company has just decided to purchase 50 percent of its inventory from China and purchases will be invoiced in Chinese yuan. What four processes do you need to consider in designing a foreign exch...

Q: Refer to Exhibit 11-1 which discloses the risk management paradigm

Refer to Exhibit 11-1 which discloses the risk management paradigm for Infosys Technologies. Explain in your own words what each step of the cycle entails, including the feedback loop from the last to...

Q: Reexamine the Risk-Mapping Cube in Exhibit 11-3.

Reexamine the Risk-Mapping Cube in Exhibit 11-3. Provide examples of how the various market risks—foreign exchange, interest rate, commodity price, and equity price—...