11 May Week 2 Topic 1 Review 150 Words
Carlos
I do think US companies should be allowed to use foreign currency derivatives to hedge against the effect of unfavorable changes in the value of foreign currencies since their able to report the gains or losses in the most beneficial foreign currency since if our currency id depreciating but the currency we sell our products to countries that their currency is increasing then that will lead for us to have a higher return in our sales of the same amount of products when our currency was more appreciated. In the FASB code 815-10-05-04 it states, “that an entity recognize derivative instruments, including certain derivative instruments embedded in other contracts, as assets or liabilities in the statement of financial position and measure them at fair value.” (FASB, 2018) This quote shows that the companies have the opportunity to use derivative instruments when it comes to foreign currencies exchange rates like from the U.S. have the opportunity to make higher returns by using this system of getting more for their value of money in their most beneficial currency which will lead for those companies to export more increasing money around the market and higher revenues. “Financial instruments that fall into this category include: currency options contracts, currency swaps, forward contracts and futures contracts.” (Investor, 2017) This quote shows the various derivatives instruments used so that a company can receive the most bang for their buck in having the foreign currency rates being the most beneficial to them so the company like in this case from the U.S. makes the most return on the sales of their foreign goods.
Word Count: 266
References
FASB. (2018). FASB Accounting Standards Certification. Retrieved January 22, 2018, from https://asc.fasb.org/section&trid=2229143&search_marker=searchresult&query=Zm9yZWlnbiBjdXJyZW5jeSBkZXJpdmF0aXZlcyBoZWRnZSB2YWx1ZSA=
Investor, W. (2018). What is Foreign Exchange Derivatives? definition and meaning. Retrieved January 22, 2018, from http://www.investorwords.com/7910/foreign_exchange_derivatives.html
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