ACC 401 Week 9 Assignment 2: Foreign Currency Risk
Albert, CEO of XYZ, Inc., desires to expand the company’s sales through exports to three (3) foreign subsidiaries. Albert knows that the target subsidiaries are located in countries that require transactions to be denominated in the local currencies. Albert has researched foreign currency risk and knows that there is accounting exposure in accounting statements, operating exposure in future cash flows, and transaction exposure in outstanding obligations. Albert does not understand how these risks apply to XYZ, Inc. under his proposal or if there are any mitigating risk strategies available. Albert requests you, the head of the Risk Management division, to prepare a report that he can present to the Board of Directors on the potential foreign currency risk if XYZ, Inc. expands sales into these markets. XYZ, Inc.’s reporting currency is the U.S. dollar and the subsidiaries would purchase the merchandise as inventory items.
Note: You may create and/or make all the necessary assumptions needed for the completion of this assignment.
Write a three to five (3-5) page paper in which you:
- Specify accounting exposure, operating exposure, and transaction exposure. Determine the main financial statement effects of each type of exposure if XYZ, Inc. expands as proposed.
- Determine two (2) types of hedges regarding foreign exchange risk, in general, and recommend the most advantageous risk mitigation strategy for XYZ, Inc. Provide support for your rationale. Note: Refer to Chapter 9 of the textbook for more information on corporate strategies regarding hedging foreign exchange risk.
- Determine the main accounting assumptions underlying each currently used method (e.g., current rate method and temporal method). Determine the fundamental differences in balance sheet exposure from the application of each method.
- Suggest the translation method that XYZ, Inc. should use in order to minimize balance sheet exposure. Provide support for your choice.
- Compare the U.S. GAAP approach to the IFRS approach of translating foreign currency financial statements. Determine the main similarities and differences between the two (2) methods of translation. Assuming one (1) of the subsidiaries of XYZ, Inc. is located in a highly inflationary country, determine the appropriate translation method under FASB and provide the theoretical justification for your response.
- Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and similar websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
- This course requires use of new Strayer Writing Standards (SWS). The format is different than other Strayer University courses. Please take a moment to review the SWS documentation for details.
- Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow SWS or school-specific format. Check with your professor for any additional instructions.
- Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
- Examine the impact that specific differences between IFRS and U.S. GAAP have on financial statements.
- Explain foreign currency transactions and analyze the accounting requirements for the translation of financial statements of foreign entities.
Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills, using the following
rubric
.
Communicating professionally and ethically is one of the
essential skillsets we can teach you at Strayer. The following
guidelines will ensure:
· Your writing is professional
· You avoid plagiarizing others, which is essential to writing ethically
· You give credit to others in your work
Visit Strayer’s Academic Integrity Center for more information.
Strayer University Writing Standards
1Strayer University Writing Standards
https://pslogin.strayer.edu/?dest=academic-support/academic-integrity-center
� If your assignment requires a title page, include the assignment title, your
name, course title, your professor’s name, and the date of submission on a
separate page.
� If your assignment does not require a title page, include the assignment title,
your name, course title, your professor’s name, and the date of submission in
the header of your document.
� Include page numbers.
� Use 1-inch margins.
� Use Arial, Courier, Times New Roman, or Calibri font style.
� Use 10, 11, or 12 point font size for the body of your text.
� Use either single or double spacing, according to assignment guidelines.
� See assignment guidelines for instructions to format tables/charts/graphs/
images.
� Use appropriate language and be concise.
� Write in active voice when possible. Find tips here.
� Use the point of view (first, second, or third person) required by the
assignment guidelines.
� Use spelling and grammar check and proofread to help ensure your work is
error free.
� Use credible sources to support your ideas/work. Find tips here.
� Cite your sources throughout your work when you borrow someone else’s
words or ideas. Give credit to the authors.
� Add each cited source to the source list at the end of your assignment so that
your reader can find and reference the original material. (See In-Text Citations
section for more details.)
� Don’t forget to cite and add your textbook to the source list if you use it as a
source.
� Include a source list when the assignment requires research or if you cite the
textbook.
� Type “Sources” centered on the first line of the page.
� List the sources that you used in your assignment.
� Organize sources in a numbered list and in order of use throughout the paper.
Use the original number when citing a source multiple times.
Writing Assignments
Title Your Work
Use Appropriate
Formatting
Write Clearly
Cite Credible Sources
Build a Source List
Strayer University Writing Standards 2
https://owl.english.purdue.edu/owl/resource/539/01/
http://libdatab.strayer.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=ers&AN=98402046&site=eds-live&scope=site
Giving Credit to Authors and Sources
When quoting or paraphrasing another source in your writing, you need to give credit by
using an in-text citation. An in-text citation includes the author’s last name and the number of
the source from the source list. Find tips here.
Option #1: Paraphrasing
Rewording Source Information in Your Own Words
· Take the source information and rephrase it in your
words. Be sure not to repeat the same words of the
author.
· Add a number to the end of your source (which will tie to
your source list).
· Remember, you cannot just replace the words of the
original sentence.
Examples
ORIGINAL SOURCE
“Writing at a college level requires informed
research.”
PARAPHRASING
As Harvey wrote, when writing a paper for
higher education, it is critical to research and
cite sources (1).
When writing a paper for higher education,
it is imperative to research and cite sources
(Harvey, 1).
Option #2: Quoting
Citing another person’s work word for word
· Place quotation marks at the beginning and the end of
the quoted information.
· Add a number to the end of your quote (which matches
your source list).
· Do not quote more than one to two sentences
(approximately 25 words) at a time.
· Do not start a sentence with a quotation.
· Introduce and explain quotes within the context of your
paper.
Examples
ORIGINAL SOURCE
“Writing at a college level requires informed
research.”
QUOTING
Harvey wrote in his book, “Writing at a college
level requires informed research” (1).
Many authors agree, “Writing at a college
level requires informed research” (Harvey, 1).
Strayer University Writing Standards 3
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Source List
The source list (which includes the sources that you used in your assignment) is a new page
that you will add at the end of your paper. The list has two purposes: it gives credit to the
authors that you use and gives your readers enough information to find the source without
your help. Build your source list as you write.
Strayer University Writing Standards 4
· Type “Sources” at the top of a new page.
· Include a numbered list of the sources you used in your paper. (the numbers
indicate the order in which you used them). A well-researched assignment has
at least as many sources as pages.
1. Use the number one (1) for the first source used in the paper, the number
two (2) for the second source, and so on.
2. Use the same number for a source if you use it multiple times.
· Ensure each source includes four parts: author or organization, publication
date, title, and how to find it. If you have trouble finding these details, then re-
evaluate the credibility of your source.
· Use the browser link for a public webpage.
· Look for a permalink tool for a webpage, which requires logging in, such as the
Strayer Library.
· Write a comment instructing your readers how to find all sources that do not
have a browser link or a permalink.
Source List Elements
AUTHOR PUBLICATION DATE TITLE HOW TO FIND
Examples
Michael Harvey
In the case of multiple
authors, only list the first.
2013
This is not the same as
copyright date, which is
denoted by ©
The Nuts &
Bolts of College
Writing
http://libdatab.strayer.edu/login?url=http://
search.ebscohost.com/login.aspx?direct
=true&db=nlebk&AN=590706&site=eds-
live&scope=site
How it Will Look in Your Source List
1. Michael Harvey, 2013, The Nuts & Bolts of College Writing, http://libdatab.strayer.edu/login?url=http://search.
ebscohost.com/login.aspx?direct=true&db=nlebk&AN=590706&site=eds-live&scope=site
Setting Up the Page
Building a Source List
Sample Source List
1. Michael Harvey, 2013, The Nuts & Bolts of College Writing, http://libdatab.strayer.edu/login?url=http://search.
ebscohost.com/login.aspx?direct=true&db=nlebk&AN=590706&site=eds-live&scope=site
2. William R. Stanek, 2010, Storyboarding Techniques chapter in Effective Writing for Business, College and Life, http://
libdatab.strayer.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=nlebk&AN=359141&site=e
ds-live&scope=site&ebv=EB&ppid=pp_23
3. Zyad Hicham, 2017, Vocabulary Growth in College-Level Students’ Narrative Writing, http://libdatab.strayer.edu/
login?url=http://search.ebscohost.com/login.aspx?direct=true&db=edsdoj&AN=edsdoj.9b7fad40e529462bafe3a936
aaf81420&site=eds-live&scope=site
4. Anya Kamenetz, July 10, 2015, The Writing Assignment That Changes Lives, https://www.npr.org/sections/
ed/2015/07/10/419202925/the-writing-assignment-that-changes-lives
5. Brad Thor, June 14, 2016, The Best Writing Advice I Ever Got, http://time.com/4363050/brad-thor-best-writing-advice/
6. Karen Hertzberg, June 15, 2017, How to Improve Writing Skills in 15 Easy Steps, https://www.grammarly.com/blog/
how-to-improve-writing-skills/
7. Roy Peter Clark, 2008, Writing Tools: 55 Essential Strategies for Every Writer
8. C.M. Gill, 2014, The Psychology of Grading and Scoring, Essential Writing Skills for College & Beyond
9. ABC Company’s Policy & Procedures Committee, Employee Dress and Attendance Policy, this is a policy in my office
10. Henry M. Sayre, 2014, The Humanities: Culture, Continuity and Change Vol 1, this is the HUM111 textbook
Strayer University Writing Standards 5