_____ A parent owns a foreign subsidiary that has as its functional currency the local currency. To avoid reporting a possible negative effect in the U.S. dollar financial statements from an adverse change in the exchange rate, the parent should hedge which of the following items?
A) The net investment (net asset) position.
B) The net monetary asset position.
C) The net monetary liability position.
D) The net monetary position whether it be positive or negative.

Question

Quizplus · Accepted Answer

Hedging the net investment (net asset) position in a foreign subsidiary is a strategy to protect against potential negative impacts on the U.S. dollar financial statements due to adverse changes in the exchange rate. This approach focuses on the overall investment in the subsidiary rather than just monetary assets or liabilities.

_____ a Parent Owns a Foreign Subsidiary That Has as Its