Determine the types of hedging , Financial Accounting

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Go to your assigned corporation's website and access their latest annual report. Answer the following questions regarding their derivative and foreign currency transactions.

1. Which categories of derivative transactions does the company engage in (cash flow hedges, fair value hedges, speculative hedges)? Describe the types of commodities that it hedges. How do derivative transactions fit into it's overall business strategy?

2. What was the income statement effect of each category? Give the total dollar amount as well as the effect as a percentage of revenues and income before tax. Have these transactions materially affected the profitability of the company? Explain your answer.

3. Where does the company disclose the financial statement impact of the cash flow hedges it enters into? Do you consider these to have a material impact on its financial position? Explain.

4. Identify the location(s) in the annual report where the company provides disclosures related to its management of foreign exchange risk.

5. If the firm uses hedging instruments to manageits foreign exchange risk, determine the manner in which the company discloses the fact that its foreign exchange hedges are effective in offsetting gains and losses on the underlying items being hedged.

6. Identify the location(s) in the annual report that provides disclosures related to the translation of foreign currency financial statements and foreign currency hedging.

7. Determine whether the company's foreign operations have a predominant functional currency.

8. Determine the amount of remeasurement gain or loss, if any, reported in net income in each of the three most recent years. Discuss the implication this has for the comparability of financial statements.

9. Determine the amount of translation adjustment, if any, reported in other comprehensive income in each of the three most recent years. Explain the sign (positive or negative) of the translation adjustment in each of the three most recent years.

10. Determine whether the company hedges net investments in foreign operations. If so, determine the type(s) of hedging instrument used.


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