A UK company hedges its US dollar purchase of equipment from a US supplier using

Question

A UK company hedges its US dollar purchase of equipment from a US supplier using a forward contract exchanging pounds for US dollars at a fixed rate. The forward qualifes as a hedge of a forecasted transaction. The company reports gains on the forward, and then closes the forward and buys the equipment. The company follows IFRS. Which statement is true?

A) The IFRS company will report a lower equipment value on its balance sheet than if it followed US GAAP.

B) The IFRS company will report less total depreciation expense on the equipment that if it followed US GAAP.

C) The IFRS company will report a higher equipment value on its balance sheet than if it followed US GAAP.

D) The IFRS company will report more total depreciation expense on the equipment than if it followed US GAAP.

Explanation / Answer

The IFRS company will report a higher equipment value on its balance sheet than if it followed US GAAP.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.