Thornton Corporation has extensive liabilities denominated in Cyprus pounds resulting from imports from Cyprus. However, Thornton's revenues are denominated solely in U.S. dollars. Which of the following is probably not true?

Question

Quizplus · Accepted Answer

Thornton Corporation has translation exposure as it needs to translate its liabilities denominated in Cyprus pounds into U.S. dollars for financial statement reporting purposes. However, it does not have economic exposure as it does not have any operations or revenues denominated in Cyprus pounds, and it does not have transaction exposure as it is not involved in any current or future transactions that involve the Cyprus pound. Thornton would benefit from a depreciation of the Cyprus pound as it would reduce the amount of U.S. dollars needed to settle its liabilities.

Thornton Corporation Has Extensive Liabilities Denominated in Cyprus Pounds Resulting