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How are gains and losses on financial instruments used to hedge the net investment in a foreign operation reported in the consolidated financial statements?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 10Q: Why is the effective-interest method of amortization required under the International Financial...

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Gains and losses on financial instruments used to hedge a foreign operation's net investment are disclosed in the consolidated financial statements in the following manner.
When are foreign currency transaction gains or losses required to be recognized in the financial statements, how are they to be disclosed and where in the financial statements?
When preparing an income statement, which of the following items would most likely be classified as other comprehensive income? A. A foreign currency translation adjustment B. An unrealized gain on a security held for trading purposes C. A realized gain on a derivative contract not accounted for as a hedge D. None of the above
Define each following terms: p. American depository receipts (ADRs); repatriation of earnings q. Country risk; exchange rate risk; political risk; business climate
Which of the following is NOT a component of Accumulated Other Comprehensive Income? A. Gains or losses on Treasury Stock B. Unrealized holding gains or losses on available-for-sale securities C. Gains or losses from foreign currency translation adjustments D. Gains or losses related to post retirement benefit plans (pensions)
Other comprehensive income includes the following, except A. unrealized gain on derivative contract designated as cash flow hedge B. loss from translating the financial statements of a foreign operation C. actuarial gain on defined benefit plan that is fully recognized D. dividends paid to shareholders
Which foreign exchange risk relates to the value of assets held in foreign currency on the statement of financial position of financial institutions which trades? a. Economic risk b. Transaction type risk c. Currency risk d. Translation risk
Comprehensive income includes items not included in the computation of net income, such as foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. True False
How should exchange gains or losses resulting from foreign currency transactions be accounted for? Included as component of income from continuing operations for the period in which the rate changes. Included as component of other comprehensive income for the period in which the rate changes. Included in the statement of financial position as a deferred item. Included in net earnings for gains, but deferred for losses.
What are the difficulties or dangers inherent in analyzing foreign financial statements? Consider the following instances.
How shall an entity subsequently measure financial liabilities? Is IFRS measurement of financial liabilities similar to that of U.S. GAAP? Also briefly describe the requirements regarding an option to designate a financial liability at fair value through profit and loss. Q: Does U.S. GAAP allow fair value option for financial assets and liabilities? Q; What is “own credit” issue related to financial liabilities measured at fair value through profit and loss? Q: How does IFRS 9 address this “own credit” issue?
describe foreign currency transaction exposure, including accounting for and disclosuresabout foreign currency transaction gains and losses