8. [Disaggregating operating and exchange rate effects] Roche, a drug multinational headquartered in Switzerland, is great y af- fected by exchange rate changes, as can be seen from its 2000 fi- nancial statements. Before answering the questions that follow, examine the "for- eign exchange rate" information on page 54 of the Roche state- ments. These data are presented as they are quoted on foreign exchange markets. The year-end 2000 rates are: $1 1.64 SFr: 143 JPY where SFr is the Swiss franc = 11.52 SFr. SFY 1 and JPY the Japanese yen.

a. Compute the percentage change versus the Swiss franc for each of the three currencies listed, from 1999 to 2000, using the (i) Average rate for the year (ii) Year-end rate

b. State which of the three currencies had the greatest percent- age change in 2000

e. Describe the expected effect of the change in part b on each of the following amounts originating in that currency: (i) Revenues (il) Operating income (iii) Operating margin (iv) Assets (v) Capital expenditures

d. Compute the percentage change in 2000 in each of the fol- lowing, using the geographical information in Roche's foot- note 4. Assume that North American operations are conducted entirely in U.S. dollars (i) European Union sales (ii) North America sales (iii) European Union segment assets (lv) North America segment assets

e. Compute the percentage change in 2000 in cach of the amounts in part d in local currencies (European Union in : North America in SU.S.).

f. Roche's consolidated statement of changes in equity show currency translation adjustments for both 1999 and 2000. State whether the direction of those adjustments is consistent with the "foreign exchange rate" information and justify your response. g. Roche's footnotes 12 and 13 show currency translation ef- fects for tangible and intangible fixed assets respectively. State whether the direction of those changes is consistent with the change in the currency translation adjustment for 2000 and justify your response h. Assume that Roche used the Swiss franc as its functional currency worldwide. Describe the expected effect of that change on Roche's financial statements, including each of the following (i) Balance sheet assets and liabilities (II) Currency translation adjustment (ili) Revenue (iv) Cost of goods sold (v) Depreciation expense (vi) Foreign currency translation gains and losses