[jingsf19]

Which of the following foreign currency transactions is not accounted for either as a fair value hedge or a cash flow hedge:

A. Available for sale security
B. Unrecognized firm commitment
C. Net investments in foreign operations
D. Foreign currency dominated foreign transaction

Hi everyone, could anyone tell me why the correct answer is c? And could you tell me or explain the meaning of this question? I am very confused ….still don’t understand, thank you very much for helping me answer it.

[CPAIN2K17]

Net investments in foreign operations is technically categorized as a fair value hedge BUT unlike fair value hedges, the gains and losses are reported as TRANSLATION GAIN OR LOSS in OCI, so it is not ACCOUNTED for like a fair value hedge (where gains and losses would go to income from continuing operations). I think that is why C is the correct answer. Someone feel free to correct me if I am wrong.

Wiley CPAExcel + Ninja MCQ & Notes

 

AUD - 97 (1/24/17)

BEC - 84 (3/10/17)

FAR - 94 (5/31/17)

REG - 88 (8/16/17)

[Author]

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