VIP专享国际会计第七版英文版课后答案(第十一章)

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Chapter11

FinancialRiskManagement

DiscussionQuestions

1.Enterpriseriskmanagementassessesindividualrisksinthecontextofafirm’sbusinessstrategy.Risks

areviewedfromaportfolioperspectivewithrisksofvariousbusinessfunctions,e.g.,FXrisk,interestraterisk,politicalriskandthelike,beingcoordinatedbyaseniorfinancialmanagerresponsibleforkeepingtopmanagementapprisedofcriticalrisksthatcouldinterferewiththeaccomplishmentofafirm’s

strategicobjectivesanddevisingriskoptimizationstrategies.Thevariablesthatmanagementaccountantsmusttrackincludefactorsbothexternalandinternaltothefirmandvariesfromcompanytocompany.

2.Marketriskreferstotheriskoflossduetounexpectedchangesinthepricesofcurrencies,interestrates,commodities,andequities.Itisnotconfinedtopricechanges.Marketriskalsoincludesliquidityrisk,marketdiscontinuities,creditrisk,regulatoryrisk,taxrisk,andaccountingrisk.Anexampleofaforeignexchangeriskisasituationwhereanexporterinvoicesacreditsaletoaforeignimporterinforeigncurrencyandforeigncurrencydevaluespriortopayment.

3.AnFXriskmanagementprogramincludesthefollowingprocesses:

a.Forecastingtheexpectedmovementintherelationbetweentheyuanandyourdomesticcurrency.

b.Measuringonaperiodicbasisyourfirm’sexposuretofluctuationsinthevalueoftheyuan.c.Designingprotectionstrategiesthatwillminimizelossesshouldtheyuanrevalue.

d.Establishinginternalcontrolstomeasureyourperformanceinhedgingtheriskoflossfromchangesinthevalueoftheyuan.

4.Translationexposuremeasurestheimpactofexchangeratechangesonthedomesticcurrencyequivalentsofafirmsforeigncurrencyassetsandliabilities.Itisprimarilyconcernedwithcurrencyrestatement.

Transactionexposuremeasuresthecashflowimpactoffluctuatingcurrencyvaluesonthesettlementofcommercialtransactionsdenominatedinforeigncurrencies.Transactionexposureisconcernedwitha

currencyconversion(exchange)process.Economicexposureattemptstomeasuretheimpactofchangingexchangeratesonthefuturerevenues,costs,andsalesvolumeofamultinationalentity.Itisconcerned

withthetemporaleffectsofexchangeratechanges.

AlthoughFASNo.52attemptstomitigateconcernwithtranslationgainsandlosses(accountingexposure),itdoesnottotallyeliminateit.CompanieschoosingtheU.S.dollarastheirfunctionalcurrencywillstillusethetemporaltranslationmethodandreporttranslationgainsandlossesinperiodincome.Companiesdesignatingthelocalcurrencyasthefunctionalcurrencywillfindtheirassetexposuresincreasedasinventoriesandfixedassetsaretranslatedusingcurrentexchangerates.Whilesuchtranslationgainsandlossesbypassincome,theadverseeffectsofcurrencyfluctuationsonacompany’sconsolidatedequitywillstillexist.Thisisespeciallylikelywhereloancovenantandothercontractualprovisionsspecifyminimumdebt-to-equityratios.Thissuggeststhattheissueofaccountingversuseconomicexposureisfarfromsettled.

5.Thechapterlists10specificmethodstoreduceafirm’sexposuretoforeignexchangeriskinadevaluation-pronecountry.Thesetechniques,andpossiblecost-benefittrade-offs,aresummarizedinthefollowingtable.

Chapter11

FinancialRiskManagement

DiscussionQuestions

1.Enterpriseriskmanagementassessesindividualrisksinthecontextofafirm’sbusinessstrategy.Risks

areviewedfromaportfolioperspectivewithrisksofvariousbusinessfunctions,e.g.,FXrisk,interestraterisk,politicalriskandthelike,beingcoordinatedbyaseniorfinancialmanagerresponsibleforkeepingtopmanagementapprisedofcriticalrisksthatcouldinterferewiththeaccomplishmentofafirm’s

strategicobjectivesanddevisingriskoptimizationstrategies.Thevariablesthatmanagementaccountantsmusttrackincludefactorsbothexternalandinternaltothefirmandvariesfromcompanytocompany.

2.Marketriskreferstotheriskoflossduetounexpectedchangesinthepricesofcurrencies,interestrates,commodities,andequities.Itisnotconfinedtopricechanges.Marketriskalsoincludesliquidityrisk,marketdiscontinuities,creditrisk,regulatoryrisk,taxrisk,andaccountingrisk.Anexampleofaforeignexchangeriskisasituationwhereanexporterinvoicesacreditsaletoaforeignimporterinforeigncurrencyandforeigncurrencydevaluespriortopayment.

3.AnFXriskmanagementprogramincludesthefollowingprocesses:

a.Forecastingtheexpectedmovementintherelationbetweentheyuanandyourdomesticcurrency.

b.Measuringonaperiodicbasisyourfirm’sexposuretofluctuationsinthevalueoftheyuan.c.Designingprotectionstrategiesthatwillminimizelossesshouldtheyuanrevalue.

d.Establishinginternalcontrolstomeasureyourperformanceinhedgingtheriskoflossfromchangesinthevalueoftheyuan.

4.Translationexposuremeasurestheimpactofexchangeratechangesonthedomesticcurrencyequivalentsofafirmsforeigncurrencyassetsandliabilities.Itisprimarilyconcernedwithcurrencyrestatement.

Transactionexposuremeasuresthecashflowimpactoffluctuatingcurrencyvaluesonthesettlementofcommercialtransactionsdenominatedinforeigncurrencies.Transactionexposureisconcernedwitha

currencyconversion(exchange)process.Economicexposureattemptstomeasuretheimpactofchangingexchangeratesonthefuturerevenues,costs,andsalesvolumeofamultinationalentity.Itisconcerned

withthetemporaleffectsofexchangeratechanges.

AlthoughFASNo.52attemptstomitigateconcernwithtranslationgainsandlosses(accountingexposure),itdoesnottotallyeliminateit.CompanieschoosingtheU.S.dollarastheirfunctionalcurrencywillstillusethetemporaltranslationmethodandreporttranslationgainsandlossesinperiodincome.Companiesdesignatingthelocalcurrencyasthefunctionalcurrencywillfindtheirassetexposuresincreasedasinventoriesandfixedassetsaretranslatedusingcurrentexchangerates.Whilesuchtranslationgainsandlossesbypassincome,theadverseeffectsofcurrencyfluctuationsonacompany’sconsolidatedequitywillstillexist.Thisisespeciallylikelywhereloancovenantandothercontractualprovisionsspecifyminimumdebt-to-equityratios.Thissuggeststhattheissueofaccountingversuseconomicexposureisfarfromsettled.

5.Thechapterlists10specificmethodstoreduceafirm’sexposuretoforeignexchangeriskinadevaluation-pronecountry.Thesetechniques,andpossiblecost-benefittrade-offs,aresummarizedinthefollowingtable.

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sameeconomicmeaningasthoseassociatedwithbasicinstruments?Howshouldgainsandlossesassociatedwithderivativeinstrumentsbereflectedintheincomestatement?Canandshouldrisksattachingtothesefinancialinstrumentsberecognizedandmeasured?

8.Studentresponsesshouldproceedalongthefollowinglines.PeleCorporation,aBrazilianfirm,hasborrowedacertainsumofBritishpoundsat9percentandisworriedthatthepoundwillappreciaterelativetotherealpriortomaturity.Tohedgethiscurrencyrisk,itarrangeswithabanktoswapthepoundsborrowedforanequivalentamountofrealsfor3yearsbearingthesamerateofinterest.Duringthe3-yearperiod,itwillmakeperiodicinterestpaymentstothebankinreals,andinreturn,receiveperiodicinterestpaymentsinpounds.Attheendofthe3-yearperiod,itwillre-exchangetherealprincipalforpoundsattheoriginalexchangerate.

9.Afuturescontractisacommitmenttopurchaseordeliveraspecifiedquantityofafinancialinstrumentorforeigncurrencyatafuturedateatapricesetwhenthecontractismade.Itdiffersfromaforwardcontractinseveralrespects.Afuturescontractisstandardizedintermsofsizeanddeliverydatewhereasaforwardcontractistailoredtoacustomer’sneeds.Futurescontractsarefreelytradedonorganizedexchanges.Incontrast,thereisnosecondarymarketforforwardcontractsastheyareprivateagreementsbetweentwoparties.Futurescontractsarecarriedatmarketvalueswithgainsorlossestakenimmediatelytoincome,whereasprofitsonaforwardcontractarerealizedonlyatthedeliverydate.Finally,apartytoafuturescontractmustmeetperiodicmarginrequirements.Inaforwardcontract,marginsaresetonce,onthedateoftheinitialtransaction.

10.Fairvaluehedgesarehedgesofafirm’sforeigncurrencyassetsandliabilitiesandfirmforeigncurrencycommitments.Cashflowhedgesarehedgesofforecastedtransactionssuchasafuturesaleorpurchase.Netinvestmenthedgesarehedgesofanexposedbalancesheetassetorliabilityposition.Forqualifyingfairvaluehedges,allchangesinthefairvalueofthederivativeandtheunderlyingitemthatisbeing

hedgedarerecognizedinearnings.Forqualifyingcashflowhedges,thechangeinthefairvalueofthederivativeisrecognizedinOtherComprehensiveIncomeandrecognizedinearningswhenthehedgedcashflowsaffectearnings.Forqualifyinghedgesofanetinvestment,changesinthefairvalueofthederivativearerecordedincomprehensiveincome

11.Intheory,thetermhighlyeffectivemeansthatgainsorlossesonhedginginstrumentsshouldbeshouldexactlyoffsetgainsorlossesontheitembeinghedged.Inpractice,itmeansthatgainsorlossesonthederivativesubstantiallyoffsetthechangesinthevalueorcashflowofthehedgeditem.Measurementofthisattributeisimportant.Ifahedginginstrumentdoesnotmeetthehighlyeffectivetest,thehedgeisterminatedanddeferredgainsorlossesonthederivativearerecognizedimmediatelyincurrentearnings.This,inturn,introducesvolatilityintoafirm’sreportedearnings.

12.Thenotionofanopportunitycostreferstothereturnassociatedwithyournextbestopportunity.IntheareaofFXriskmanagement,itentailscomparingagivenriskmanagementstrategywithanappropriatestandardofcomparison.Thisprovidesanobjectivemeansofassessingtheeffectivenessofagivenriskreductionprogram.Forexample,whenFXriskmanagementprogramsarecentralizedatcorporateheadquarters,appropriatebenchmarksagainstwhichtocomparethesuccessofcorporateriskprotectionwouldbeprogramsthatlocalmanagerscouldhaveimplementedontheirown.

Exercises

1.Studentsusuallyglossoverdiagramswithoutthinkingthemthrough.Thisexerciseforcesthemtothinkthrougheachstepofthediagramandallowsthemtobetterinternalizetheriskmanagementcycle.Responsesmightfollowthefollowingpattern:Step1involvesoperationalizingafirmsstrategiesinto

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quantifiableobjectivesandthenidentifyingdevelopmentsbothexternalandinternalrisksthatcouldaffecttheachievementoftheseobjectives.Theserisksaremeasuredbythefirm’saccountantsandquantifiedintermsoftheirpotentialimpactonthefirm.Forexample,thefirmmayhaveasitsstrategicobjectiveanincreaseof5%ofmarketshareinagivencountryperyeargivenassumptionsabouttherateofeconomicgrowthinthatcountry.Thechancethatthisgrowthratemayfallshortof5%andtheimpactofthisshortfallforprojectedsalesinthatcountrywouldbequantified.ResponseformulationwouldinvolveidentifyingprotectionstrategiestominimizethehittosalesofprojectedGNPshortfallssuchaspromotioncampaignstomaintainsalesoruseofalternativesourcingvenuestolowersalesprices.ThisstrategywouldbeimplementedifprojectedGNPstartedtoslowbeyondacertaincutoffpoint.Theimpactofthisprotectionstrategywouldthenbequantifiedintermsofactualsalesrelativetoforecastsalestakingintoaccountthecostsofprotection.Theinformationcontainedinriskmanagementperformancereportswouldthenbecommunicatedtotopmanagementwhowouldbeinapositiontoreaffirmoralterstrategicobjectivesand/orriskidentificationprocesses.

2.Foreignexchangeriskadevaluationoftheforeigncurrencyinwhichanaccountreceivablewasdenominatedwouldcausethedomesticcurrencycashflowstodecrease.Thiswouldcausecurrentassetstodecrease.Alternatively,arevaluationoftheforeigncurrencywouldcausetheaccountreceivableandcurrentassetstoincrease.Interestrateriskanincreaseinmarketratesofinterestwouldcausethepriceofashort-termfixed-ratedebtinstrumentbeingheldasamarketablesecuritytodecrease.This,inturn,wouldcausecurrentassetstodecrease.Adecreaseininterestrateswouldhavetheoppositeeffect.

Commoditypriceriskanincreaseinthepriceofcopperwouldcausethecostofcopperpurchasesandtheresultantunexpiredcostofinventoriesinthecurrentassetsectionofthebalancesheettoincrease.Afallincopperpriceswouldhavetheoppositeeffect.Equitypriceriskafallinstockpriceswoulddepressthecarryingvalueofmarketablesecurities(currentassets),andconversely.

3.Thepurposeofthisexerciseistoforcestudentstolookatmanagerialaccountingissuesfromtheuser’sperspective.Studentsmaysuggestadditionalinformationsourceswithrespecttoinflationdifferentials,balanceoftradeandbalanceofpaymentsstatistics,internationalmonetaryreserves,forwardexchangequotations,thebehaviorofrelatedcurrencies,andinterestratedifferentials.Werecommendthatthisexercisebeassignedtosmallgroupstoencourageteamwork.Atthetimethisexercisewasprepared,professionalforecasterswerepredictingarateof10.5ecrustotheU.S.dollar.

Somegroupsmaycontendthatexchangemarketsareefficientandthatexchangeratechangesaresimplyrandomevents.Again,theymustbepreparedtoconvincemanagementoftheircase,orataminimum,identifytheconsequencesofnotattemptingexchangerateforecasts.

4.CurrentrateCurrent/NoncurrentMonetary/nonmonetary

Exposedassets(PHP):

Cash500,000500,000500,000

Accountsreceivable1,000,0001,000,0001,000,000

Inventories(LCM)900,000900,000

Fixedassets1,100,000----

Total3,500,0002,400,0001,500,000

Exposedliabilities:

Short-termpayables

Long-termdebt

Total

400,000

800,000

1,200,000

400,000

400,000

400,000

800,000

1,200,000

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$(3,000)

Positive/(negative)exposure

PositiveexposureX$0.03

PositiveexposureX$0.02

FXgain/(loss)

2,300,000

$69,000

46,000

$(23,000)

2,000,000

$60,000

40,000

$(20,000)

300,000

$9,000

6,000

5.

ExposedAssets:

Cash&duefrombanks

Loans

Fixedassets

ExposedLiabilities:

Deposits

Ownersequity

Netexposedassets

(liabilities)

ExposedAssets:

Cash&duefrombanks

Loans

Fixedassets

ExposedLiabilities:

Deposits

Ownersequity

Netexposedassets

(liabilities)

ILS

100,000

200,000

40,000

260,000

ILS

100,000

200,000

40,000

260,000

$

50,000

30,000

100,000

(20,000)

$

50,000

30,000

100,000

(20,000)

£

(40,000)

15,000

(55,000)

£

(40,000)

15,000

(55,000)

$Equivalent

20,000

100,000

30,000

50,000

100,000

NIL

$Equivalent

20,000

100,000

30,000

50,000

100,000

NIL

6.

TrialBalanceBefore

Cash&duefrombanks

Loans

Fixedassets

Deposits

Ownersequity

ILS

100,000

200,000

40,000

$

50,000

30,000

100,000

£$Equivalent

(40,000)20,000

100,000

30,000

15,00050,000

100,000

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TrialBalanceAfter

(£/$/ILS=1/2/8)

ILS$£$Equivalent

Cash&duefrombanks100,00050,000(40,000)(5,000)

Loans200,00050,000

Fixedassets30,00030,000

Deposits40,00015,00040,000

Ownersequity100,000100,000

Translationloss$(65,000)

7.Onerecommendationmightbetoreducepositiveexposuresbyengaginginbalancesheethedging,thatis,byremittingexcesscashbacktothecorporateparent,reducingtheaffiliatebank’soutstandingloans,orincreasingitsdepositsinIsraelishekels..Thetrade-offsherearepotentiallynegativeeffectsonoperations,suchasnotsatisfyingloandemandagainsthedgingtranslationgainsandlosses.AnotheroptionistoincreasethepricingofbankservicesinIsraeltoprovideaprofitmarginthatcanoffsetanyFXlosses.Again,theeffectsofsuchactionsoncompetitivepositioningcouldfarexceedthebenefitsofhedging.Athirdoptionistobuyaforwardorcurrencyswaptohedgetheexposure.Trade-offsincludetheout-of-pocketcostoftheexchangecontractversusthereportedlossesavoided.

1.IftheU.S.dollaristhefunctionalcurrency,thetranslationgainuponconsolidationisaggregatedwiththetransactionlossontheforeigncurrencyborrowinganddisclosedasonelineitemintheconsolidatedincomestatement.Thisfigureisdeterminedasfollows:

Translationgain=PositiveexposureXchangeinexchangerate

=NZD3,000,000x$.10

=$300,000

Transactionloss=NZDloanbalanceXchangeinexchangerate

=NZD1,000,000x$.10

=$(100,000)

Aggregateexchangeadjustment=$300,000+$(100,000)

=$200,000

IftheNewZealanddollaristhefunctionalcurrency,thetranslationgainuponconsolidationbypassesincomeandappearsasaseparatecomponentinconsolidatedequity.ItisoffsetbythetranslationlossontheNewZealanddollarborrowing.

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9.

4/1CD(¥32,500,000÷¥120)$250,000

Cash$250,000

(PurchaseofCD)

Chips(¥32,500,000÷¥120)$270,833

Cash(¥3,250,000÷¥120)$27,083

A/P(¥29,250,000÷¥120)243,750

(Torecordcreditpurchase)

7/1CD(¥30,000,000÷[¥120-¥110])$22,727

FXgain$22,727

(TorecordgainonCDinvestment)

Purchases(¥29,250,000÷[¥120-¥110])22,159

Accts.Payable22,159

(Torecordincreaseinpurchasesandrelatedliabilityaccountsowingtoyenappreciation)

7/1Cash(¥30,000,000÷¥110)$278,182

Interestincome(¥30,000,000X.08X¼)÷¥110]$5,455

CD272,727

(TorecordmaturationofCD)

Interestexpense[(¥29,250,000x.08x3/12)÷¥110)5,318

Accts.payable(¥29,250,000÷¥110)265,909

Cash271,227

(Torecordsettlementofpurchasetransaction)

10.Journalentries:

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6/1CHFContractreceivable$133,333

Deferredpremium3,334

$Contractpayable$136,667

(Torecordcontractwiththeforeigncurrencydealertoexchange$136,667forCHF166,667)

6/30CHFContractreceivable1,667

Transactiongain1,667

(Torecordtransactiongainfromincreaseddollarequivalentofforwardcontractreceivable;$.81-$.80xSWF166,667)

6/30Premiumexpense1,111

Deferredpremium1,111

(Toamortizedeferredpremiumfor1month)

9/1SWCHFContractreceivable3,333

Transactiongain3,333

(Torecordadditionaltransactiongainbyadjustingforwardcontracttothenewcurrentrate;$.83-$.81xCHF166,667)

9/1Premiumexpense2,223

Deferredpremium

(Amortizationofdeferredpremiumbalance)

2,223

9/1$Contractpayable

Cash

Foreigncurrency

CHFContractreceivable

136,667

136,667

138,333

138,333

(Torecorddeliveryof$136,667toforeigncurrencydealerinexchangeforCHF166,667withadollarequivalentof$138,334(=CHF166,667x$.83).TheSwissfrancswill,inturnbeusedtopayforthechocolatesupplies).

11.Calculations:

Ifthepremiumontheforwardcontractisconsideredanoperatingexpense,andtheconditionsforhedgetreatmentaremet,i.e.,managementdesignatestheforwardcontractasahedge,documentsitsriskmanagementobjectiveandstrategy,identifiesthehedginginstrument,theitembeinghedgedandtheriskexposure,andthattheforwardiseffectivebothprospectivelyandretrospectivelyinhedgingtherisk,thegainontheforwardcanbeoffsetagainstthelossonthepayableasfollows:

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AmountpaidtosettletheaccountpayableonthepurchaseLessTransactiongainonforwardcontract

Costofpurchase

$138,333

(5,000)

$133,333

The$133,000iswhatwasoriginallyanticipated,CHF166.667X$0.80=$133,333.

12.Journalentries:

Thecalloptionisintendedtohedgeanuncertaincashflow.Accordingly,gainsorlossesonthehedginginstrumentwouldbe

disclosedincomprehensiveincomeandreclassifiedintoearningsintheperiodthesaleactuallytakesplace.

June1Premiumexpense$28,125

Cash$28,125

($.018XCHF62,500X25)

August31

Cash

Comprehensiveincome

[($.416-$.39)XCHF62,500X25]

$40,625

$40,625

Case11-1

ExposureIdentification

1.Infosysappearstohaveseveralexposuresasenumeratedbelow.

ForeignExchangeRisk

PageValue-Drivers

88Revenues/Sellingandadministrativeexpenses

89Cashflowsfrominterest/dividendincome

96Revenuerecognition/LTleases

97Operatingincome/foreigncurrencytransactions/FA

98Marketing/Overseasstaffexpenses

99Derivativevalues

100Leaseobligations

101Investmentreturns

102Segmentrevenues/expenses

103DividendstoADSholders

142Penaltiesonexportobligations

149Valuingintangibles

150Exportrevenues

CommodityPriceRisk

PageValue-Drivers

98Powerandfuelexpenses

145Brandvaluation

147/48Currentcostdisclosures

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149Valueofintangibles

EquityPriceRisk

PageValueDrivers

87Sharecapital

98Dilutedeps

100Stockoptioncompensationexpense

103Convertiblepreferreds

145Costofcapital

151Economicvalue-added

InterestRateRisk

PageValue