Complete the Hedging Foreign Subsidiaries course!

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Course Summary

"American Fortune 500 corporations are holding more than $2.1 trillion of “permanently reinvested” profits offshore." Looking at this staggering amount from a foreign exchange perspective, these permanent investments are typically made by multinational corporations in foreign subsidiaries, which present foreign exchange translation risk to their parent companies in the form of net income and net investment exposures. As a result, multinational corporations must manage the currency risk associated with these foreign operations by deciding if, when and how to hedge these exposures.

Foreign currency translation risk exists for companies with subsidiaries that use a different functional currency than the parent. Unlike foreign exchange transaction risk, which is often hedged due to its impact on earnings and cash flows, foreign exchange translation risk is typically a lesser priority when it comes to hedging since it is often viewed as an accounting event that usually does not impact real cash flows. Nonetheless, companies that hedge translation risk should be aware of the pros and cons of hedging, and recognize the reasons many organizations tend to focus on the net investment component of the overall exposure rather than the net income component for accounting reasons and otherwise.

Companies that succeed abroad over the long term know the important role FX risk management plays in their longevity. This course will outline the fundamentals of hedging net income and net investment exposures in foreign subsidiaries, and reveal the cash flow and accounting implications of hedging with derivatives using the “default” and “elective” accounting treatment. Upon completion of this program, you will have a clear understanding of the key reasons for and against hedging the foreign exchange risk associated with foreign subsidiaries.

Questions to Consider
  • Are you curious why global firms often report a variance due to FX when releasing consolidated earnings?
  • Do you want to know the three most common challenges when hedging foreign subsidiary net income?
  • Would you like to see an example of Apple establishing a 2.5 billion euro subsidiary in Ireland and hedging the currency risk of their net investment?
  • Can you picture how companies take a more strategic versus standard approach to hedging foreign subsidiaries?
  • If you want answers to all of theses questions, you will find them by enrolling in this course.
Learning Objectives
  1. Explore the concept of hedging net income generated at foreign subsidiaries, and recognize the accounting, forecasting, and cash flow challenges associated with hedging future earnings.
  2. Explore the concept of hedging net investments in foreign subsidiaries, and recognize how "elective" accounting treatment can mitigate earnings volatility and better align the financial reporting of a hedge.
Additional Information

Presenter: Evan Mahoney, CPA
Sponsor: FX Initiative, LLC
Last Review Date: September 2024
Course Expiration: 1 Year from Enrollment Date
Duration: 1 Hour
CPE Credits: 1 CPE Credit
Program Level: Basic
Prerequisites: None
Advanced Preparation: None
Delivery Method: QAS Online Self Study
Field of Study: Management Services

To contact us about this program, including complaint, refund, and cancellation policy information, please email support@fxinitiative.com or call (312) 566-7475.


FX Initiative, LLC (Sponsor ID#112915) is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have the final authority on the acceptance of individual courses for CPE credit. Concerns regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org