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Autumn2005- TBS 907-Lecture 10- International Finance

Methods of hedging translation exposure

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Unformatted text preview: should be translated based on their maturity. Current assets translated at the spot rate. Noncurrent assets translated at the historical rate in effect when the item was first recorded on the books The underlying principle is that monetary accounts have a similarity because their value represents a sum of money whose value changes as the exchange rate changes. All monetary balance sheet accounts (cash, marketable securities, accounts receivable, etc.) of a foreign subsidiary are translated at the current exchange rate. All other (nonmonetary) balance sheet accounts (owners' equity, l...
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