Company A, an American company, owns Company B, a Canadian subsidiary. Company A borrowed 1,000,000 Canadian dollars as a hedge on its net investment in Company B. For 20X3, Company A recorded an exchange gain of $40,000 due to exchange rate changes. The 20X3 translation adjustment for Company B was a debit of $42,000.
Required:
Describe the accounting treatment required for the hedge on Company A's books.

Question

Quizplus · Accepted Answer

The Answer of Company A, an American company, owns Company B, a Canadian subsidiary. Company A borrowed 1,000,000 Canadian dollars as a hedge on its net investment in Company B. For 20X3, Company A recorded an exchange gain of $40,000 due to exchange rate changes. The 20X3 translation adjustment for Company B was a debit of $42,000.
Required:
Describe the accounting treatment required for the hedge on Company A's books.

Company A, an American Company, Owns Company B, a Canadian