Hedging Net Investment

Part 1

As described in the text, gains and losses on foreign currency borrowings can be used to hedge the net investment in a foreign subsidiary. How are these reported in the consolidated financial statements? In addition, what other techniques may a company use to hedge net investments? Develop a 200-to-300-word analysis supporting your position.

Part 2

If you work for a publicly traded company, download the company’s annual report. If you do not work for a publicly traded company, download the annual report of one of your favorite brands (e.g., Apple or Dell). Search through the report and look for the section regarding “managing risk” (it may be under a different name, but it is in there). Describe how this company uses hedges or contracts to manage currency risk.