Answer the following the questions covering the main objectives of this module:
- Define and differentiate between a cash flow hedge and a fair value hedge. What might cause a US-based firm to consider using one hedge vs. the other hedge?
- Summarize the differences that exist between the US GAAP and IFRS on the accounting for derivatives designated as hedges at the current date you are answering this question.
- Prepare an example of a US-based firm managing an exposed foreign currency net liability position including the journal entries required from the date the US firm purchases goods on account from a foreign-based supplier until the date the purchase is settled, including all journal entries required over a 3- month period. Do not copy the example from your course textbook-please create your own personal example.
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