Question 1

A specific foreign currency exposure being hedged is commonly called the ______________________________________.

Accepted Answer

The answer of A specific foreign currency exposure being hedged...

Question 2

In an FX forward, each party must _________________________________________ its _________________________________________ at the expiration date.

Accepted Answer

The answer of In an FX forward, each party must...

Question 3

Split accounting deals solely with the manner of reporting the change in a derivative's carrying value.

Accepted Answer

A) True 
 B)False

Question 4

_____ In a hedge of a firm purchase commitment using an FX forward, how should premium and discount accruals occurring during the commitment period be reported?

Accepted Answer

A)  Recognize currently in earnings. 
B)  Defer until the transaction date. 
C)  Defer until the settlement date. 
D)  Recognize currently in income or defer (management's discretion). 
E)  None of the above. 
A)  Recognize currently in earnings. 
B)  Defer until the transaction date. 
C)  Defer until the settlement date. 
D)  Recognize currently in income or defer (management's discretion). 
E)  None of the above.

Question 5

In a foreign currency option, the option writer has potential loss exposure-not the option holder.

Accepted Answer

A) True 
 B)False

Question 6

All FX forwards are valued using the change in the spot rate.

Accepted Answer

A) True 
 B)False

Question 7

In a derivative, the party that is in a favorable position has only "balance-sheet risk."

Accepted Answer

A) True 
 B)False

Question 8

In a cash flow hedge, the concern is that an adverse cash flow result will occur on a firm commitment.

Accepted Answer

A) True 
 B)False

Question 9

In a fair value hedge, the concern is always that a loss will be incurred (1) on an existing asset or existing liability or (2) a firm commitment.

Accepted Answer

A) True 
 B)False

Question 10

_____ Which of the following results occur for FX forwards and options?

Accepted Answer

The answer of _____ Which of the following results occur...

Question 11

Hedging and hedge accounting are synonymous terms.

Accepted Answer

A) True 
 B)False

Question 12

An option to sell is referred to as a "put."

Accepted Answer

A) True 
 B)False

Question 13

In a fair value hedge, any premium or discount accrual during the commitment period on an FX forward used to hedge a firm commitment must be deferred until the transaction date.

Accepted Answer

A) True 
 B)False

Question 14

All FX forwards are valued using the change in the forward rate.

Accepted Answer

A) True 
 B)False

Question 15

In a fair value hedge, any premium or discount accrual during the commitment period on an FX forward used to hedge a firm commitment must be deferred until the settlement date.

Accepted Answer

A) True 
 B)False

Question 16

The four types of hedging categories that exist are (1) _____________________ hedges (hedges that do not qualify as hedges in any of the following three categories), (2) _______________________ hedges, (3) _________________________ hedges, (4) ________________________ hedges.

Accepted Answer

The answer of The four types of hedging categories that...

Question 17

_____ Hedging which of the following items would always be a hedge of a firmly committed transaction?

Accepted Answer

A)  A domestic company's budgeted import purchases. 
B)  A domestic company's budgeted export sales. 
C)  A foreign subsidiary's budgeted sales. 
D)  A foreign subsidiary's budgeted net income. 
E)  None of the above. 
A)  A domestic company's budgeted import purchases. 
B)  A domestic company's budgeted export sales. 
C)  A foreign subsidiary's budgeted sales. 
D)  A foreign subsidiary's budgeted net income. 
E)  None of the above.

Question 18

The four types of hedging categories that exist are undesignated hedges, fair value hedges, cash value hedges, and net investment hedges.

Accepted Answer

A) True 
 B)False

Question 19

In a cash flow hedge, amounts initially reported in Other Comprehensive Income are reclassified to earnings when the transaction on the hedged item is reported in earnings.

Accepted Answer

A) True 
 B)False

Question 20

The accounting for an importing transaction and the accounting for a related hedging transaction using an FX forward are completely independent of each other.

Accepted Answer

A) True 
 B)False

Exam 14: Using Derivatives to Manage Foreign Currency Exposures

A specific foreign currency exposure being hedged is commonly called the ______________________________________.

In an FX forward, each party must _________________________________________ its _________________________________________ at the expiration date.

Split accounting deals solely with the manner of reporting the change in a derivative's carrying value.

_____ In a hedge of a firm purchase commitment using an FX forward, how should premium and discount accruals occurring during the commitment period be reported?

In a foreign currency option, the option writer has potential loss exposure-not the option holder.

All FX forwards are valued using the change in the spot rate.

In a derivative, the party that is in a favorable position has only "balance-sheet risk."

In a cash flow hedge, the concern is that an adverse cash flow result will occur on a firm commitment.

In a fair value hedge, the concern is always that a loss will be incurred (1) on an existing asset or existing liability or (2) a firm commitment.

_____ Which of the following results occur for FX forwards and options?

Hedging and hedge accounting are synonymous terms.

An option to sell is referred to as a "put."

In a fair value hedge, any premium or discount accrual during the commitment period on an FX forward used to hedge a firm commitment must be deferred until the transaction date.

All FX forwards are valued using the change in the forward rate.

In a fair value hedge, any premium or discount accrual during the commitment period on an FX forward used to hedge a firm commitment must be deferred until the settlement date.

The four types of hedging categories that exist are (1) _____________________ hedges (hedges that do not qualify as hedges in any of the following three categories), (2) _______________________ hedges, (3) _________________________ hedges, (4) ________________________ hedges.

_____ Hedging which of the following items would always be a hedge of a firmly committed transaction?

The four types of hedging categories that exist are undesignated hedges, fair value hedges, cash value hedges, and net investment hedges.

In a cash flow hedge, amounts initially reported in Other Comprehensive Income are reclassified to earnings when the transaction on the hedged item is reported in earnings.

The accounting for an importing transaction and the accounting for a related hedging transaction using an FX forward are completely independent of each other.

Wholly Owned Subsidiaries: at Date of Creation

Wholly Owned Subsidiaries: Postcreation Periods

Partially Owned Created Subsidiaries & Variable Interest Entities

Introduction to Business Combinations

The Purchase Method: at Date of Acquisition-100 Ownership

The Purchase Method: Postacquisition Periods and Partial Ownerships

New Basis of Accounting

Introduction to Intercompany Transactions

Intercompany Inventory Transfers

Intercompany Fixed Asset Transfers & Bond Holdings

Changes in a Parents Ownership Interest, Statement of Cash Flows, & Earnings Per Share

Reporting Segment and Related Information

International Accounting Standards & Translating Foreign Currency Transactions

Translating Foreign Currency Statements: The Current Rate Method

Translating Foreign Currency Statements: The Temporal Method and the Functional Currency Concept

Interim Period Reporting

Securities and Exchange Commission Reporting

Bankruptcy Reorganizations and Liquidations

Partnerships: Formation and Operation

Partnerships: Changes in Ownership

Partnerships: Liquidations

Estates and Trusts

Governmental Accounting: Basic Principles and the General Fund

Governmental Accounting: The Special-Purpose Funds and Special General Ledger

Not-For-Profit Organizations: Introduction and Private Npos

Filters

In an FX forward, each party must _ its _ at the expiration date.

The four types of hedging categories that exist are (1) _________ hedges (hedges that do not qualify as hedges in any of the following three categories), (2) _ hedges, (3) _ hedges, (4) __________ hedges.