To Account for a Forward Contract Cash Flow Hedge of a Foreign

question 20

Multiple Choice

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at the balance sheet date

• A) 1. Adjust hedged asset or liability to fair value, with counterpart (change in fair value) reported as foreign exchange gain or loss in net income, 2. Adjust forward contract to fair value (either an asset or a liability), with counterpart (change in fair value) reported in AOCI, 3. Transfer an amount from AOCI to net income to offset the foreign exchange gain or loss on the hedged asset or liability recognized in 1, and 4. Transfer from AOCI to net income (as discount expense or premium revenue) the current period's amortization of discount or premium
• B) 1. Adjust hedged asset or liability to fair value, with counterpart (change in fair value) reported as foreign exchange gain or loss in net income and 2. Adjust option to fair value (either an asset or zero value), with counterpart (change in fair value) reported as gain or loss in net income
• C) 1. Adjust forward contract to fair value (either an asset or a liability), with counterpart (change in fair value) reported as gain or loss in net income and 2. Adjust firm commitment to fair value (based on change in forward rate), with counterpart (change in fair value) reported as gain or loss in net income
• D) 1. Adjust hedged asset, with counterpart (change in fair value) reported as a foreign exchange gain in net income and 2. Adjust forward contract to fair value (either an asset or a liability), with counterpart (change in fair value) reported as a gain or loss in net income
• E) 1. None. No journal entry is required.

Recognize the importance of control features in quasi-experimental designs to approximate true experimental conditions.

Understand the effect of interventions and the importance of measuring their reversibility.

Understand the concept of marginal utility and its impact on total utility.

Grasp the concept of consumer surplus and how it is determined in different scenarios.

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Definitions:

Reasonably Foreseeable Users

Individuals who could be expected to use or be affected by a product or service, considered in legal and design considerations.

Accountant Liability

The obligation of accountants to adhere to ethical and accurate reporting standards, failing which they may face legal consequences.

Securities Misrepresentations

Involves providing false or misleading information about a company or its financial vehicles, impacting investors' decisions.

Auditor Liability

The legal responsibility of auditors for the financial reports they certify, especially if misconduct or negligence leads to investor or company losses.