Question

Foreign Currency Impact

Kellogg included the following note in its fiscal 2015 10-K report ($ millions).

Comparable net income attributable to Kellogg ............................. $1,257

Foreign currency impact................................................ (100)

Currency neutral comparable net income attributable to Kellogg ................ $1,357

a. Assume the foreign currency impact related entirely to foreign sales. Determine whether the $US strengthened or weakened vis-à-vis the currencies in which Kellogg conducts business.

b. Assume the foreign currency impact related entirely to purchases of goods from foreign vendors. Determine whether the $US strengthened or weakened vis-à-vis the currencies in which Kellogg conducts business.

c. As an analyst, how would we treat this foreign currency impact in our analysis of Kellogg?

Answer 1

Answer:-

(a);-

• Cash impartial net similar pay for Kellogg has expanded by $100 million because of the remote money affect.
• This implies the outside deals (income got in a cash other than $US when converted into $US drives a gain of $100 million for Kellogg.
• We can close from this that $US is deteriorating against the remote money thus Kellogg has possessed the capacity to report a gain.
• In this manner $US has debilitated.

(b).

• Here remote money affect identifies with buy of merchandise thus Kellogg more likely than not paid $US for the buy of products in another nation.
• As it were the $US was changed over into an outside money for satisfying the merchandise obtained.
• In the event of surge $US more likely than not reinforced to convey additions to Kellogg.

(c).

• As an investigator we ought not treat this effect with the end goal of calculation of working pay.
• The expert will likewise need to consider the theme 830 in Accounting Standards Codification to figure out which is the utilitarian money.