Tuesday, September 1, 2009

Forex Hedge Accounting Treatment

Why Hedge?
Tapping into the global economy can be an effective way to expand your business. However, the success of your company’s international business is tied to foreign exchange rate volatility, with constant rate fluctuations contributing to unexpected profits or losses. Forex hedging is meant to reduce the risk associated with a company’s exposure to foreign currency balances and transactions. It is in your company’s best interests to recognize these risks and formulate a hedging strategy to safeguard against currency fluctuations, thereby creating cost and revenue certainty for your foreign currency transactions.

What Is Hedging?
Basic Concept: The forex hedge’s change in value is opposite to the change in value of the foreign currency exposure (hedged item). These two amounts offset each other to obtain cost certainty or revenue certainty.
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Forex Hedge Accounting Treatment

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Forex Hedge Accounting Treatment

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