Forex exposure for Tech M & Oracle
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Tech Mahindra enters into foreign exchange forward contracts and currency option contracts to hedge against foreign currency risk from amounts denominated in currencies other than the Indian rupee. Over half of Tech Mahindra's revenue comes from Europe while nearly a third comes from the US. Oracle also uses hedging techniques like foreign currency forward contracts to offset risks associated with foreign currency exposures from its global transactions and investments in international subsidiaries. Both companies closely monitor currency fluctuations and have hedging policies in place to manage their foreign exchange exposure.
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UNIVERSITY OF CALICUT
MASTER OF BUSINESS ADMINISTRATION
BUS4E F05/IB05 FOREX MANAGEMENT
Time 60 hours 4 credits
Module I
Meaning of the Term “Foreign Exchange”, Exchange Market, Statutory basis of Foreign Exchange, Evolution of Exchange Control, Outline of Exchange Rate and Types, Import Export India’s Forex Scenario: BOP crisis of 1990, LOERMS, Convertibility.Introduction to International Monetary Developments: Gold standard, Bretton Woods’s system, Fixed Flexible Exchange Rate Systems, Euro market.
Module II
Finance Function: Financial Institutions in International Trade. Non-resident Accounts: Reparable and Non Reparable, Significance for the Economy and Bank. Methods of IN Trade Settlement: Open Account, Clean Advance, Documentary Credit, Documentary Collection. -- Documentary Credits (Letter of Credit): Types of LC – Parties, Mechanism with illustration.
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Module IV
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Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
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This document discusses foreign exchange risk and strategies for reducing exposure for international businesses. It covers:
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2) Most international transactions use strong reference currencies like USD, EUR, GBP, JPY due to stability. Exchange rates are set by supply/demand in markets and factors like inflation, interest rates, economic performance.
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Angela Da Costa's Presentation
Web based user interface application, audio not accessible on this type of application. I started to edit certain things and am now seeing they are blank so hopefully its because of the animations
Ind-As-21.pdf
To prescribe how to include foreign currency transactions and foreign
operations in the financial statements of an entity and how to translate
financial statements into a presentation currency.
Indian Accounting Standard (Ind AS) 21 The Effects of Changes in Foreign Exch...
Indian Accounting Standard (Ind AS) 21
The Effects of Changes in Foreign Exchange Rates
https://ajsh.in/
Translation of Foreign Currency in Financial Statements An.docx
Translation of Foreign Currency in Financial Statements
And
Preparation of Journal Entries
This week’s focus is on the translation of foreign currency financial statements for the purpose of
preparing consolidated financials and also posting journal entries.
When preparing consolidated financial statements on a worldwide basis, the foreign currency financial
statements prepared by foreign operations must be translated into the parent company’s reporting
currency.
Issues related to this translation:
1. Which method should be used, and
2. Where should the resulting translation adjustment be reported in the consolidated financial
statements.
Translation methods differ on the basis of which accounts are translated at the current exchange rate
and which are translated at historical rates. Accounts translated at the current exchange rate are
exposed to translation adjustment (balance sheet exposure).
Different translation methods give rise to different concepts of balance sheet exposure and translation
adjustments of differing sign and magnitude.
There are four major methods of translating foreign currency financial statements:
1. current/noncurrent method
2. monetary/non-monetary method
3. temporal method
4. current rate
We will be focusing on the temporal and current rate methods.
CURRENT RATE METHOD
All assets and liabilities are translated at the current exchange rate giving rise to a balance sheet
exposure equal to the foreign subsidiary’s net assets. Stockholders’ equity accounts are translated at
historical exchange rates. Income statement items are translated at the average exchange rate for the
current period.
Appreciation of the foreign currency results in a positive translation adjustment
Depreciation of the foreign currency results in a negative translation adjustment
Translating all assets and liabilities at the current exchange rate maintains the relationships that exist in
the foreign currency financial statements.
Translating assets carried at historical cost at the current exchange rate results in amounts being
reported on the parent’s consolidated balance sheet that have no economic meaning.
TEMPORAL METHOD
A method of foreign currency translation that uses exchange rates based on the time assets and
liabilities are acquired or incurred. The exchange rate used also depends on the method of valuation
that is used. Assets and liabilities valued at current costs use the current exchange rate and those that
use historical exchange rates are valued at historical costs. Source: INVESTOPEDIA
With the temporal method assets are carried at current or future value (cash, marketable securities,
receivables) and liabilities are re-measured at the current exchange rate.
Assets carried at historical cost and stockholders’ equity accounts are re-measured at historical
exchange rates.
Expenses related to assets re ...
Accounting for foregn curency 6-1 (2).pptx
IAS 21 addresses the accounting and reporting effects of changes in foreign exchange rates. It prescribes how to include foreign currency transactions and foreign operations in financial statements, and how to translate financial statements into the presentation currency. Exchange differences arising from foreign currency transactions and translations are generally recognized in profit or loss. However, some differences may be recognized in other comprehensive income. The functional currency is determined based on the primary economic environment the entity operates in, considering factors like the currency of sales prices and costs.
IntroductionThe company that has been researched is the Toyota .docx
Introduction:
The company that has been researched is the Toyota motor Corporation
Ticker symbol
TM
Exchange
New York Stock Exchange (NYSE)
No of common shares outstanding
1,583,714,334
Industry
Consumer goods
Country
Japan
Toyota Motor Corporation is considered to be a leading automaker headquartered in Japan. The human resources vertical employed 317,734 people and was the largest automobile manufacturer by production. Founded in 1937, the automaker has grown and has its presence in all countries of the world .the Toyota motor corporation group is considered to be one of the largest conglomerates in the world
A. Provide a rationale for the U.S. publicly traded company that you selected, indicating the significant factors driving your decision as a financial manager
Some financial highlights of the company which favorably incline towards investing in this company:
1. The third quarter result of the financial results of the firm showed that on a consolidated basis,
a. net revenues for the period totaled 19.12 trillion yen, an increase of 17.8 percent compared to the same period last fiscal year.
b. Operating income increased from 818.5 billion yen to 1.85 trillion yen,
c. Income before income taxes was 2.02 trillion yen.
d. Net income increased from 648.1 billion yen to 1.52 trillion yen
e. Operating income increased by 1.03 trillion yen.
Some of the major contributors to the increase in income were cost reduction efforts and favorable currency fluctuations. The global sales of automobiles under the group registered a 25% increase globally.
As the financial manger of a company, my instincts towards advising a client to invest in a company are grounded by strong fundamentals. Toyota Motor Corporation has been very strong in its financial fundamentals. Companies whose financial fundamentals are very strong make good investments portfolios.
Such firms are called blue chip companies and trades very selectively on the stock markets are can be studied in depth for any investment purposes. Such firms rarely indulge themselves in any kind of compliance issues are generally favored by investors.
Toyota Motor Corporation is one such stock that as a finance manager I would recommend to buy and hold because the firm has been in the news for all the right reasons and for its future plans of expansion with very strategic mergers and acquisitions. The firm’s product ranges especially the new line of green automotive ranges have caught the fancy of al countries and it is expected that the company will be giving a return of more than 22% to its shareholders (toyotaglobal.com).
B. Determine the profile of the investor for which this company may be a fit, relative to that potential investor's investment strategy. Provide support for your rationale.
The profile of a suitable investor for the company would be a conservative risk taker. The investor would like to buy the stock and hold it for long periods so as to partake of the .
Mazda 0321286375 2009 Presentation
Experience Mazda Zoom Zoom Lifestyle and Culture by Visiting and joining the Official Mazda Community at http://www.MazdaCommunity.org for additional insight into the Zoom Zoom Lifestyle and special offers for Mazda Community Members. If you live in Arizona, check out CardinaleWay Mazda's eCommerce website at http://www.Cardinale-Way-Mazda.com
INTERNATIONAL FINANCIAL MANAGEMENT INTRODUCTION
This document discusses the role and responsibilities of an international financial manager. It begins with an introduction to concepts like globalization and the rise of multinational corporations. It then defines international financial management as managing the financial functions of a business's international operations. The key responsibilities of an international financial manager include:
1) Making investment, financing, and dividend decisions while considering additional factors like exchange rates, inflation risks, and tax rates in different countries.
2) Coordinating the financial activities of a multinational corporation's subsidiaries across various countries.
3) Estimating and minimizing various risks associated with international operations like exchange rate risk, political risk, and interest rate risk.
Intenational flow of funds
This document discusses international flows of funds and balance of payments. It explains that the balance of payments records all transactions between domestic and foreign entities over a period of time. It is made up of a current account, capital account, and financial account. The current account covers trade in goods and services as well as income flows. A country's balance of payments can be influenced by economic factors like exchange rates, inflation, national income, and government policies. It also discusses how trade imbalances can be corrected and describes several international organizations that facilitate global capital flows and trade.
solusi manual advanced acc zy Chap012
The document discusses issues related to multinational accounting and the translation of foreign entity financial statements. It provides answers to multiple questions covering topics such as the benefits of adopting international financial reporting standards (IFRS), the structure and process of the International Accounting Standards Board (IASB), considerations around US adoption of IFRS, foreign currency translation methods, and the determination of a foreign entity's functional currency.
72653145 international-financial-management-1
This document provides an overview of international financial management. It discusses the globalized business environment and the financial challenges that managers face. Key topics covered include international financial markets, the goals and risks of multinational corporations, types of foreign exchange exposure, and important terms in international finance such as letters of credit, balance of payments, and authorized dealers. The document aims to introduce readers to the complex field of managing financial issues that arise in international trade and global business operations.
Interntional finance 23aug 2
International finance involves managing foreign exchange risks, currency flows, tax laws, and debt-equity ratios. Several countries have bond markets that allow international borrowing. Developing countries pay higher interest rates on bonds. International stock exchanges provide access to global capital markets. Foreign bonds are sold outside a company's home country and may be denominated in other currencies. Financial centers offer loans and deposits in foreign currencies at competitive rates. Internal financing generates funds, while currency fluctuations and inflation pose financial risks that must be managed. Accounting systems must comply with standards in both home and host countries.
Implication of Exchange rates on Businesses
1. Volkswagen reported a 95% drop in fourth quarter 2003 profits due to two main factors: the sharp rise of the euro against the dollar during 2003, and Volkswagen's decision to only hedge 30% of its currency exposure compared to its usual 70%.
2. Exchange rates can impact businesses in three main ways: transaction exposure affects individual deals, translation exposure impacts reported financial statements, and economic exposure influences long-term competitiveness.
3. Businesses can reduce transaction and translation exposure through forward exchange contracts, currency swaps, and managing payables and receivables. Reducing economic exposure requires distributing production globally to balance currency risk.
FX and TP
The document discusses the impact of foreign exchange (forex) fluctuations on transfer pricing. It defines three types of forex risk: transaction risk, which arises from changes in exchange rates between the transaction and settlement dates; translation risk, which occurs when consolidating financial statements in different currencies; and economic risk, which arises when a company has sales in one currency but costs in another. The document notes that due to forex gains or losses, a company's revenue and operating margins could increase or decrease. It also discusses relevant case laws which established that forex gains and losses should be considered part of a company's operational income for transfer pricing analysis purposes.
EXFO Annual General Meeting - January 2015
The document summarizes EXFO's financial performance in fiscal year 2014 and first quarter of 2015. Some key points:
- FY 2014 sales were $230.8 million, down 4.7% year-over-year due to reduced carrier spending in the Americas. Bookings increased 3% to $240.4 million.
- Q1 2015 sales were $56.7 million, up from the previous year. Bookings totaled $54.2 million.
- EXFO is pursuing a growth strategy focused on bolstering wireless presence, evolving into a solutions supplier, and accelerating profitability through tight cost controls and revenue growth.
- The company launched a substantial issuer bid to purchase up to
CHAPTER 11 Translation ExposureWhat gets measured gets managed..docx
CHAPTER 11 Translation Exposure
What gets measured gets managed.
—Anonymous
LEARNING OBJECTIVES
■Examine how the process of consolidation of a multinational firm’s financial results creates translation exposure
■Illustrate both the theoretical and practical differences between the two primary methods of translating or remeasuring foreign currency-denominated financial statements
■Understand how translation can potentially alter the value of a multinational firm
■Explore the costs, benefits, and effectiveness of managing translation exposure
Translation exposure, the second category of accounting exposures, arises because financial statements of foreign subsidiaries—which are stated in foreign currency—must be restated in the parent’s reporting currency so that the firm can prepare consolidated financial statements. Foreign subsidiaries of U.S. companies, for example, must restate foreign currency-denominated financial statements into U.S. dollars so that the foreign values can be added to the parent’s U.S. dollar-denominated balance sheet and income statement. Using our example U.S. firm, Ganado, this is shown conceptually in Exhibit 11.1. This accounting process is called translation. Translation exposure is the potential for an increase or decrease in the parent’s net worth and reported net income that is caused by a change in exchange rates since the last translation.
Although the main purpose of translation is to prepare consolidated financial statements, translated statements are also used by management to assess the performance of foreign subsidiaries. While such assessment by management might be performed using the local currency statements, restatement of all subsidiary statements into the single “common denominator” of one currency facilitates management comparison. This chapter reviews the predominate methods used in translation today, and concludes with the Mini-Case, McDonald’s, Hoover Hedges, and Cross-Currency Swaps, illustrating how one major multinational manages its investment and translation risks.
EXHIBIT 11.1 Ganado’s Cross-Border Investments and Consolidation
Overview of Translation
There are two financial statements for each subsidiary that must be translated for consolidation: the income statement and the balance sheet. Statements of cash flow are not translated from the foreign subsidiaries. The consolidated statement of cash flow is constructed from the consolidated statement of income and consolidated balance sheet. Because the consolidated results for any multinational firm are constructed from all of its subsidiary operations, including foreign subsidiaries, the possibility of a change in consolidated net income or consolidated net worth from period to period, as a result of a change in exchange rates, is high.
For any individual financial statement, internally, if the same exchange rate were used to remeasure each and every line item on the individual statement—the income statement and balance sheet—there would b ...
Solution Manual Advanced Accounting 9th Edition by Baker Chapter 12
The document discusses issues related to multinational accounting and the translation of foreign entity financial statements. It provides answers to multiple questions covering topics such as the benefits of adopting international accounting standards, the structure and mission of the International Accounting Standards Board, the process for developing global standards, and methods for translating foreign entity financial statements into the parent company's reporting currency. Specifically, it addresses how to determine a foreign entity's functional currency, the difference between translation and remeasurement methods, how translation adjustments are recorded, and issues around consolidating foreign subsidiaries.
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Global Financial MAnagement for budding entrepreneurs
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Translation of Foreign Currency in Financial Statements An.docx
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IntroductionThe company that has been researched is the Toyota .docx
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CHAPTER 11 Translation ExposureWhat gets measured gets managed..docx
CHAPTER 11 Translation ExposureWhat gets measured gets managed..docx
Solution Manual Advanced Accounting 9th Edition by Baker Chapter 12
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Money market funds invest in short-term debt instruments like treasury bills to provide a safe place for savings with low returns. Bond funds invest in government and corporate debt and aim to provide income but carry more risk than money market funds. Balanced funds contain a mix of bonds and stocks, typically 60% equity and 40% fixed income. Equity funds focus on long-term capital growth through stock investments. International and global funds invest overseas to provide currency and geographic diversification to portfolios. Specialty funds target specific sectors, regions, or socially responsible criteria. Index funds replicate the performance of broad market indices.
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Two major Types: Debt Securities and Equity Securities.
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Forex exposure for Tech M & Oracle
- 1. Foreign Exchange Exposure Tech Mahindra Ltd & Oracle Group 7
- 3. Profit/Loss on Account of Forex Exposure • The Company enters into Foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian rupee. • The counter party to the Company’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. • These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions.
- 4. The following are the outstanding GBP: USD Currency Exchange Contracts entered into by the company which have been designated as Cash Flow Hedges as at March 31, 2010:
- 5. The following are the outstanding GBP: USD Currency Exchange Contracts entered into by the company which have been designated as Cash Flow Hedges as at March 31, 2010:
- 6. Quarterly Break Up of Revenue
- 7. Hedging Policy of the company Foreign currency transactions: • Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the year end rates. • The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the year/period is recognised as income or expense
- 8. Split of Revenue During the year, 58.6% of the Company’s revenue came from Europe, 29.4% came from USA and 12.0% came from Rest of the World (ROW) in which 4.6 % came from India. As the country operates majorly in UK and rest of Europe, the 2 currencies which dominate are GBP and EURO.
- 9. Oracle
- 10. Oracle • Foreign currency exchange rates in comparison to the U.S. Dollar weakened by 10%, the amount of cash, cash equivalents and marketable securities are reported in U.S. Dollars which increased by approximately $695 million, assuming constant foreign currency cash, cash equivalent and marketable securities balances.
- 11. Quarter to Quarter Profit/Loss
- 12. Hedging Policy of the company • Company transact business in various foreign currencies and are subject to risks associated with the effects of certain foreign currency exposures. • They have a program that primarily utilizes foreign currency forward contracts to offset these risks associated with foreign currency exposures.
- 13. Split of Revenue
- 14. Foreign Currency Translation Risk • Fluctuations in foreign currencies impact the amount of total assets and liabilities that is reported for the foreign subsidiaries upon the translation of these amounts into U.S. Dollars. • In particular, the amount of cash, cash equivalents and marketable securities that is reported in U.S. Dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period
- 15. Foreign Currency Net Investment Risk • Company hedge net assets of their international subsidiaries using foreign currency forward contracts to offset the translation and economic exposures related to their foreign currency-based investments in these subsidiaries. • These contracts have been designated as net investment hedges pursuant to ASC 815. They entered into these net investment hedges for all of fiscal 2009 and the majority of fiscal 2010
- 16. Conclusion • Derivative use for hedging is only to increase global linkages and volatile exchange rates. Firms need to look at instituting a sound risk management system and also need to formulate their hedging strategy that suits their specific firm characteristics and exposures. • In India, regulation has been steadily eased and turnover and liquidity in the foreign currency derivative markets has increased, although the use is mainly in shorter maturity contracts of one year or less. Forward and option contracts are the more popular instruments.
- 17. THANK YOU