最新multinational financial management（跨国公司财务）ch10 measuring and managing accounting exposure(共27张ppt课件).pptx

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1、CHAPTER 10Measuring and Managing Accounting Exposure 第一页，共二十七页。PART I. ALTERNATIVE MEASURES OF FOREIGN EXCHANGE EXPOSUREI. ALTERNATIVE MEASURESA. TYPES1.Accounting or Translation Exposure:arises when reporting and consolidating financial statements require conversion from subsidiary to parent curren

2、cy.第二页，共二十七页。How Translation Risk ArisesTranslation RiskSubsidiary FinancialsSubsidiary FinancialsSubsidiary FinancialsHeadquartersConsolidatedFinancials$JapanUnited StatesGermany第三页，共二十七页。Economic Exposure2. Economic Exposure:arises because exchange ratechanges alter the value of future revenues an

3、d costs. 第四页，共二十七页。ALTERNATIVE MEASURES OF FOREIGN EXCHANGE EXPOSUREEconomic Exposure= Transaction Exposure + Operating Exposure Operating Exposurearises because exchange ratechanges alter the value of future revenues and costs.第五页，共二十七页。PART II.ALTERNATIVE CURRENCY TRANSLATION METHODSI. FOUR METHOD

4、S OF TRANSLATIONA. Current/Noncurrent Method1. Current accounts use current exchange rate for conversion.2. Income statement accounts use average exchange rate for the period.第六页，共二十七页。ALTERNATIVE CURRENCY TRANSLATION METHODSB. Monetary/Nonmonetary Method1.Monetary accounts use currentrate2.Pertains

5、 to- cash- accounts receivable- accounts payable- long term debt第七页，共二十七页。ALTERNATIVE CURRENCY TRANSLATION METHODS3.Nonmonetary accounts- use historical rates- Pertains to inventoryfixed assetslong term investments4.Income statement accounts - use average exchange rate for the period.第八页，共二十七页。ALTER

6、NATIVE CURRENCY TRANSLATION METHODSC. Temporal Method1.Similar to monetary/nonmonetarymethod.2.Use current method for inventory.第九页，共二十七页。ALTERNATIVE CURRENCY TRANSLATION METHODSD.Current Rate Methodall statements use current exchange rate for conversions.第十页，共二十七页。PART III.DESIGNING A HEDGING STRAT

7、EGYI. DESIGNING A HEDGING STRATEGYA.Strategiesa management objectiveB.Hedging: basic objective:reduce/eliminate volatility ofearnings as a result of exchangerate changes.第十一页，共二十七页。DESIGNING A HEDGING STRATEGYC. Hedging exchange rate risk1.Is a cost-center2.Should be evaluated as a purchase of insur

8、ance.第十二页，共二十七页。DESIGNING A HEDGING STRATEGYD. Centralization is key1.Important aspects:a.Degree of centralizationb.Responsibility for its developmentc.Implementation2.Maximum benefits accrue fromcentralizing policy-making, formulation, and implementation.第十三页，共二十七页。PART II.MANAGING TRANSLATION EXPO

9、SUREI. MANAGING TRANSLATION EXPOSUREA. Choices faced by the MNC:1.Adjusting fund flowsaltering either the amounts or the currencies of the planned cash flows of the parent or its subsidiaries to reduce the firms local currency accounting exposure.第十四页，共二十七页。MANAGING TRANSLATION EXPOSURE2.Forward con

10、tractsreducing a firms translation exposure by creating an offsetting asset or liability in the foreign currency.第十五页，共二十七页。MANAGING TRANSLATION EXPOSURE3. Exposure nettinga. offsetting exposures in one currency with exposures in the same or another currency b. gains and losses on the two currency p

11、ositions will offset each other.第十六页，共二十七页。MANAGING TRANSLATION EXPOSUREB. Basic hedging strategy for reducing translation exposure:1.increasing hard-currency(likely to appreciate) assets2.decreasing soft-currency(likely to depreciate) assets3.decreasing hard-currency liabilities4.increasing soft-cu

12、rrency liabilities第十七页，共二十七页。MANAGING TRANSLATION EXPOSURE reduce the level of cash, tighten credit terms to decrease accounts receivable, increase LC borrowing, delay accounts payable, and sell the weak currency forward.第十八页，共二十七页。PART IlI. MANAGING TRANSACTION EXPOSUREI. METHODS OF HEDGINGA. Risk

13、shiftingB. Currency risk sharingC. Currency collarsD. Cross-hedgingE. Exposure nettingF. Forward market hedgeG. Foreign currency options第十九页，共二十七页。MANAGING TRANSACTION EXPOSUREA. RISK SHIFTING1. home currency invoicing2. zero sum game3. common in global business 4. firm will invoice exports in stron

14、g currency, import in weak currency5. Drawback:it is not possible with informed customers or suppliers.第二十页，共二十七页。MANAGING TRANSACTION EXPOSUREB. CURRENCY RISK SHARING1. Developing a customized hedge contract 2. The contract typically takes the form of a Price Adjustment Clause, whereby a base price

15、 is adjusted to reflect certain exchange rate changes.第二十一页，共二十七页。The Zone$1.50/$1.60/Take no actionsTake no action第二十二页，共二十七页。MANAGING TRANSACTION EXPOSUREB. CURRENCY RISK SHARING (cont) 3. Parties would share the currency risk beyond a neutral zone of exchange rate changes.4. The neutral zone repr

16、esents the currency range in which risk is not shared.第二十三页，共二十七页。MANAGING TRANSACTION EXPOSUREC. CURRENCY COLLARS1. Contractbought to protect against currencymoves outside the neutral zone.2. Firm would convert its foreign currency denominated receivable at the zone forward rate.第二十四页，共二十七页。MANAGIN

17、G TRANSACTION EXPOSURED. CROSS-HEDGING1. Often forward contracts not available in a certain currency.2. Solution: a cross-hedge - a forward contract in a related currency.3. Correlation between 2 currencies is critical to success of this hedge.第二十五页，共二十七页。MANAGING TRANSACTION EXPOSUREE. EXPOSURE NET

18、TING1. Protection can be gained by selecting currencies that minimize exposure2. Netting: MNC chooses currencies that are notperfectly positively correlated.3. Exposure in one currency can be offset by the exposure in another.第二十六页，共二十七页。内容(nirng)总结CHAPTER 10。1.Similar to monetary/nonmonetary。1.Is a cost-center。3.decreasing hard-currency liabilities。4.increasing soft-currency liabilities。2. Netting:第二十七页，共二十七页。