Gains from forward contracts to hedge translation exposure are taxable whereas losses from hedging translation exposure are not.

Question

Quizplus · Accepted Answer

Gains from hedging translation exposure using forward contracts are taxable, as they generate a profit or income for the company. However, losses incurred from hedging translation exposure are not deductible for tax purposes. This is in accordance with tax laws in most countries.

Gains from Forward Contracts to Hedge Translation Exposure Are Taxable