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  • Financial Derivatives: Foanual PDF

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    Luis Oso Guerrero
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    Wal-Mart used interest rate swaps to hedge against changes in interest rates on its fixed-rate debt. This case study discusses how interest rate swaps work, their accounting treatment, and the motivations for using them, including potential influences of accounting standards. It also addresses whether financial statement disclosures provide sufficient information about risks related to financial instruments. The company entered into foreign currency forward contracts to protect itself from variability in exchange rates for paying Mexican liabilities in US dollars from purchases of imported goods. As of December 31, 2016, there were forward contracts for $47.42 million maturing within two months. The contracts had a notional value of $976,053 and fair value of $9,309,

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    Wal-Mart used interest rate swaps to hedge against changes in interest rates on its fixed-rate debt. This case study discusses how interest rate swaps work, their accounting treatment, and the motivations for using them, including potential influences of accounting standards. It also addresses whether financial statement disclosures provide sufficient information about risks related to financial instruments. The company entered into foreign currency forward contracts to protect itself from variability in exchange rates for paying Mexican liabilities in US dollars from purchases of imported goods. As of December 31, 2016, there were forward contracts for $47.42 million maturing within two months. The contracts had a notional value of $976,053 and fair value of $9,309,

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    © All Rights Reserved
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    2 views1 page

    Financial Derivatives: Foanual PDF

    Uploaded by

    Luis Oso Guerrero
    Wal-Mart used interest rate swaps to hedge against changes in interest rates on its fixed-rate debt. This case study discusses how interest rate swaps work, their accounting treatment, and the motivations for using them, including potential influences of accounting standards. It also addresses whether financial statement disclosures provide sufficient information about risks related to financial instruments. The company entered into foreign currency forward contracts to protect itself from variability in exchange rates for paying Mexican liabilities in US dollars from purchases of imported goods. As of December 31, 2016, there were forward contracts for $47.42 million maturing within two months. The contracts had a notional value of $976,053 and fair value of $9,309,

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Financial Derivatives

    Wal-Mart's Use of Interest Rate Swaps" recounts Wal-Mart's use of interest rate
    swaps to hedge the fair value of its fixed-rate debt against changing interest rates.
    This case provides students with a foundation for understanding the use of and
    accounting for more complex derivatives. Specific issues raised include (1) the
    financial statement impact of hedge accounting; (2) motivations for using
    derivatives, including the potential role of accounting standards; and (3) the degree
    to which financial statement and MD&A disclosures are sufficiently informative
    about the risks associated with financial instruments.

    Forward Contract

    The company subscribed forwards contracts of foreign currency with the objective
    of protecting itself from the exposure to the variability in the exchange rate for the
    payment in liabilities in Mexico related to the purchase of imported merchandise
    agreed in US dollars.

    As of December 31, 2016, there are forwards contracts with a validity of two
    months for an amount of US $ 47.42 million. The notional value and fair value
    amount to $ 976,053 and $ 9,309- net and is presented in the income (expense)
    financial line of the consolidated statement of comprehensive income.

    https://www.walmex.mx/assets/files/Informacion%20financiera/BMV/BMV/Esp/2017/Walmex_in
    foanual.pdf

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