One Possible Reason for a Balance Sheet Hedge Could Be

question 2

True/False

One possible reason for a balance sheet hedge could be because the foreign subsidiary is about to be liquidated, so that value of its Cumulative Translation Adjustment (CTA) would be realized.

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Definitions:

Depreciation Method

A systematic approach for allocating the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Residual Value

The estimated value that an asset will have at the end of its useful life, often considered for depreciation calculations.