Foreign
Currency Translation and Hedging activities
Many companies
make annual reports available on their corporate home page. Annual reports also
be accessed through the SEC’s EDGAR
system at www.sec.gov (under Filing
Type, search for 10-K).
Access the
most recent annual report for U.S.- based multinational company with which you
are familiar.
Required:
a. Identify the location (s) in the
annual report that provides disclosures related to the translation of foreign
currency financial statements and foreign currency hedging.
b. Determine whether the company’s
foreign operations have a predominant functional currency.
c. Determine the amount of remeasurement
gain or loss, if any, reported in net income in each of the three most recent
years
d. Determine the amount of translation
adjustment, if any, reported in other comprehensive income in each of the three
most recent years. Explain the sign (positive or negative) of the translation
adjustment in each of the three most recent years.
e. Determine whether the company hedges
net investments in foreign operations. If so, determine the type(s) of hedging
instrument used.
Foreign
Currency translation disclosures in the computer industry
Many companies
make annual reports available on their corporate home page. Annual reports also
be accessed through the SEC’s EDGAR
system at www.sec.gov (under Filing
Type, search for 10-K)
Access the
most recent annual report for the following U.S.- based multinational
corporations:
International
Business Machines Corporation.
Dell
Computer Company.
Required:
a. Identify the location (s) in the
annual report that provides disclosures related to the translation of foreign
currency financial statements and foreign currency hedging.
b. Determine whether the company’s
foreign operations have a predominant functional currency. Discuss the
implication this has for the comparability of financial statements of the two
companies.
c. Determine the amount of translation
adjustment, if any, reported in other comprehensive income in each of the three
most recent years. Explain the sign (positive or negative) of the translation
adjustment in each of the three most recent years. Compare the relative
magnitude of these translation adjustments for the two companies.
d. Determine whether each company hedges the net
investment in foreign operations. If so, determine the type(s) of hedging
instrument used.
e. Prepare a brief report comparing and
contrasting the foreign currency translation and foreign currency hedging
policies of these two companies.
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