REFERENCE: Ref.09_03
Car Corp.(a U.S.-based company)sold parts to a Korean customer on December 16,2008,with payment of 10 million Korean won to be received on January 15,2009.The following exchange rates applied:
SHAPE \* MERGEFORMAT

-Which of the following statements is true concerning hedge accounting?

Question

REFERENCE: Ref.09_03
Car Corp.(a U.S.-based company)sold parts to a Korean customer on December 16,2008,with payment of 10 million Korean won to be received on January 15,2009.The following exchange rates applied:
SHAPE \* MERGEFORMAT
 
-Which of the following statements is true concerning hedge accounting?

Quizplus · Accepted Answer

Hedges of foreign currency firm commitments can be used for future sales or purchases. The purpose of hedge accounting is to mitigate the risk of foreign currency fluctuations on these commitments, whether they are for current or future transactions. Therefore, option C is also partially correct, but D is a more comprehensive answer. Option A and B are incorrect, as hedge accounting is not limited to future sales or purchases only. Option E is incorrect, as hedge accounting is not speculative in nature, but rather a risk management tool.

REFERENCE: Ref.09_03 Car Corp.(a U.S.-Based Company)sold Parts to a Korean Customer on Customer