_____ A parent owns a foreign subsidiary that has as its functional currency the U.S. dollar. To avoid reporting a possible negative effect in the U.S. dollar financial statements from an adverse change in the exchange rate, the parent should hedge which of the following items?
A) The net investment (net asset) position.
B) The net monetary asset position.
C) The net monetary liability position.
D) The net monetary position whether it be positive or negative.

Question

Quizplus · Accepted Answer

Hedging the net monetary position, whether it be positive or negative, is the correct strategy to avoid reporting a negative effect in the U.S. dollar financial statements from an adverse change in the exchange rate. This approach addresses both assets and liabilities, providing comprehensive coverage against exchange rate fluctuations.

_____ a Parent Owns a Foreign Subsidiary That Has as Its