Question 4Which of the following statements relating to foreign currency hedging is false? Instead of hedging with foreign currency derivatives, some companies use natural hedging by diversifying across currency zones , through operational matching of revenues and expenses, or through the use of non-derivative financial instruments. Generally, hedge accounting for foreign currency risk requires that the hedged transaction be denominated in a currency other than the hedging entity's functional currency. In the context of hedge accounting considerations, a key distinction between a forecasted transaction and a firm commitment is the certainty and enforceability of the terms of the transaction. Forward contracts are normally standardized and exchange-traded instruments, and therefore valued based on quoted market prices.

Hedge funds refer to the collection of money contributed by the investors in order to create a fund…

Answered: ich of the following statements…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

Which of the following statements relating to foreign currency hedging is false?

		Instead of hedging with foreign currency derivatives, some companies use natural hedging by diversifying across currency zones , through operational matching of revenues and expenses, or through the use of non-derivative financial instruments.
		Generally, hedge accounting for foreign currency risk requires that the hedged transaction be denominated in a currency other than the hedging entity's functional currency.
		In the context of hedge accounting considerations, a key distinction between a forecasted transaction and a firm commitment is the certainty and enforceability of the terms of the transaction.
		Forward contracts are normally standardized and exchange-traded instruments, and therefore valued based on quoted market prices.