Question: When long term debt hedges a revenue stream a portion of
When long-term debt hedges a revenue stream, a portion of the long-term debt becomes exposed to the risk of changes in exchange rates. Why is this?
Answer to relevant QuestionsWhen will the premium paid on a forward contract to hedge a firm commitment to purchase inventory be reported in income under a cash flow hedge? Explain. Differentiate between the accounting for a fair value hedge and a cash flow hedge. Manitoba Exporters Inc. (MEI) sells Inuit carvings to countries throughout the world. On December 1, Year 5, MEI sold 10,000 carvings to a wholesaler in a foreign country at a total cost of 600,000 foreign currency units ...Grammy Ltd., a Canadian company, is dealing with a supplier in a foreign country. On May 1, Year 4, the company made purchases totalling FF3,270,000; this amount is payable in six months. Grammy did not hedge the transaction ...The temporal and current rate methods each produce different amounts for translation gains and losses due to the items at risk. Explain.
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