Create an example of the use of foreign exchange options

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Reference no: EM132212298

Question: Create an example of the use of foreign exchange options to hedge an anticipated purchase of inventory using a cash flow hedge.

It is important for you to demonstrate your understanding of the accounting rules and resulting journal entries that surround these concepts, especially for multinational corporations. Corporations face determining the impact on their financial statements of these types of foreign currency related transactions on almost a daily basis.

Create your own specific and detailed example of foreign exchange options to hedge an anticipated purchase of inventory using a cash flow hedge over a three-month period of time.

Show the required journal entries required at each respective date during the three-month period, including an explanation of the basis of each of your journal entry calculations and the authoritative support for each entry following the US GAAP.

Make sure your journal entries are clear with regards to which financial statement account is affected by each of your journal entries (Balance Sheet, Income Statement, Other Comprehensive Income, etc.)

Reference no: EM132212298

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