Question

Many companies make annual reports available on their corporate website, often under an Investors tab. Annual reports also can be accessed through the SEC's EDGAR system at www.sec.gov (under Filings, click Company Filings Search, type in Company Name, and under Filing Type, search for 10-K).

Access the most recent annual report for the following U.S.-based multinational corporations to complete the requirements:

International Business Machines Corporation

Intel Corporation

Required:

a. Identify the location(s) in the annual report that provides disclosures related to foreign currency translation and foreign currency hedging.

b. Determine whether the company's foreign operations have a predominant functional currency.

c. Determine the amount of translation adjustment, if any, reported in other comprehensive income in each of the three most recent years. Explain the sign (positive or negative) of the translation adjustment in each of the three most recent years. Compare the relative magnitude of these translations adjustments for the two companies.

d. Determine whether each company hedges net investments in foreign operations. If so, determine the type(s) of hedging instruments used.

Answer 1

a. Identify the location(s) in the annual report that provides disclosures related to foreign currency translation and foreign currency hedging.

Answer : It comes under Management discussion point on page no. 66 under the head Currency rate fluctuations.

b. Determine whether the company's foreign operations have a predominant functional currency.

Yes .

c. Determine the amount of translation adjustment, if any, reported in other comprehensive income in each of the three most recent years. Explain the sign (positive or negative) of the translation adjustment in each of the three most recent years. Compare the relative magnitude of these translations adjustments for the two companies.

Foreign currency translation adjustment are

Sign explanation

d. Determine whether each company hedges net investments in foreign operations. If so, determine the type(s) of hedging instruments used.

Yes ,each company hedges net investments in foreign operations . A large portion of the company’s foreign currency denominated debt portfolio is designated as a hedge of net investment in foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the functional currency of major foreign subsidiaries with respect to the U.S. dollar. The company also uses cross-currency swaps and foreign exchange forward contracts for this risk management purpose.