Differences between the methods of translation

Assignment Help Finance Basics

Reference no: EM131932957

Question: Albert, CEO of XYZ, Inc., desires to expand the company's sales through exports to three (3) foreign subsidiaries. Albert knows that the target subsidiaries are located in countries that require transactions to be denominated in the local currencies. Albert has researched foreign currency risk and knows that there is accounting exposure in accounting statements, operating exposure in future cash flows, and transaction exposure in outstanding obligations. Albert does not understand how these risks apply to XYZ, Inc. under his proposal or if there are any mitigating risk strategies available. Albert requests you, the head of the Risk Management division, to prepare a report that he can present to the Board of Directors on the potential foreign currency risk if XYZ, Inc. expands sales into these markets. XYZ, Inc.'s reporting currency is the U.S. dollar and the subsidiaries would purchase the merchandise as inventory items. Note: You may create and / or make all necessary assumptions needed for the completion of this assignment.

Specify accounting exposure, operating exposure, and transaction exposure. Determine the main financial statement effects of each type of exposure if XYZ, Inc. expands as proposed. Determine two (2) types of hedges regarding foreign exchange risk, in general, and recommend the most advantageous risk mitigation strategy for XYZ, Inc. Provide support for your rationale. Determine the main accounting assumptions underlying each currently used method (e.g., current rate method and temporal method). Determine the fundamental differences in balance sheet exposure from the application of each method. Suggest the translation method that XYZ, Inc. should use in order to minimize balance sheet exposure. Provide support for you choice. Compare the U.S. GAAP approach to the IFRS approach of translating foreign currency financial statements. Determine the main similarities and differences between the two (2) methods of translation. Assuming one (1) of the subsidiaries of XYZ, Inc. is located in a highly inflationary country, determine the appropriate translation method under FASB and provide the theoretical justification for your response. Use at least two (2) quality academic resources in this assignment.

Reference no: EM131932957

Questions Cloud

Net working capital can be described : A stock with a Beta > 1 would be considered to be less risky than the overall stock market. Net Working Capital can be described as:

Compute the manufacturing overhead spending variances : Sven Enterprises is a large producer of gourmet pet food. Compute the manufacturing overhead spending and volume variances

The impact of guerrilla government on the political policy : Consider the competing obligations and responsibilities that these individuals faced and how they determined whether their actions were right.

Steps to hypotheses testing : For this Assignment, review this week's Learning Resources, including the 5 step approach to hypothesis testing document. Read the research scenario

Differences between the methods of translation : Determine the main similarities and differences between the two (2) methods of translation. Assuming one (1) of the subsidiaries of XYZ, Inc. is located.

Explain the administrative and planning phase : Fire is one of the most devastating elements that can destroy the physical components of an entity quickly.

How would that be a way to avoid paying taxes : One of my business professors told me that depreciation was a huge tax giveaway by the government. How would that be a way to avoid paying taxes?

Make a journal entry to record the income tax expense : Excess tax depreciation will reverse equally over a four-year period, 20x2-20x5. Make a journal entry to record the income tax expense and liabilities for 20x1

How did the war change america : Discuss the War of 1812. Begin with a short background of the conflict and the reasons for a U.S. declaration of war.

User Account

All Pages