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 2016, Company A recorded an exchange gain of $40,000 due to exchange rate changes.The 2016 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

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 2016, Company A recorded an exchange gain of $40,000 due to exchange rate changes.The 2016 translation adjustment for Company B was a debit of $42,000.
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Required:
​
Describe the accounting treatment required for the hedge on Company A's books.

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 2016, Company A recorded an exchange gain of $40,000 due to exchange rate changes.The 2016 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