The gain or loss on an after-tax basis from the hedging operations that can be considered a translation adjustment is limited in amount to the current translation adjustment from the equity investment.

Question

Quizplus · Accepted Answer

The statement is true. The gain or loss on an after-tax basis from the hedging operations is limited to the current translation adjustment from the equity investment. This is because the objective of hedging is to offset the potential losses from the changes in the foreign exchange rates that affect the equity investment's value. Hence, the hedging gain or loss cannot exceed the impact of the translation adjustment on the equity investment.

The Gain or Loss on an After-Tax Basis from the Hedging