Week 7 Discussion – Foreign Currency Transactions and International Financial Reporting Standards (IFRS)

QUESTION

Foreign Currency Transactions and International Financial Reporting Standards (IFRS)•Analyze the main reasons why a company might prefer a foreign currencyoption over a forward contract in hedging a foreign currency firmcommitment. In contrast, analyze the main reasons why a company mightprefer a forward contract over an option in hedging a foreign currencyasset or liability. Determine the option (i.e., a foreign currency option or aforward contract) that you consider to be more effective. Provide arationale for your response.Assume that all the companies in the world use International FinancialReporting Standards (IFRS). Determine at least two (2) obstacles to theworldwide comparability of financial statements, and provide one (1)strategy to overcome the obstacles in question. Provide support for yourrationale.

ANSWER:

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