Sony Corporation reported the following in the Notes to Consolidated Financial Statements included in the company's 2012
Question:
Foreign Exchange Forward Contracts and Foreign Currency Option Contracts
Foreign exchange forward contracts and purchased and written foreign currency option contracts are utilized primarily to limit the exposure affected by changes in foreign currency exchange rates on cash flows generated by anticipated intercompany transactions and intercompany accounts receivable and payable denominated in foreign currencies.
Sony also enters into foreign exchange forward contracts, which effectively fix the cash flows from foreign currency denominated debt.
Required:
Explain in your own words why Sony has entered into foreign exchange forward contracts and foreign currency option contracts.
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Sony has intercompany transactions that result in one affiliate paying foreign currency to or receiv...View the full answer
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