ANSWER POST 4

GIVE YOUR EDUCATED OPINION TO THE POST BELOW. ONLY NEED A FEW SENTENCES.

I chose Microsoft Corporation. As per the notes to the financial statements, the foreign currencies sections states that “assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to other comprehensive income (“OCI”)” (Sec, pg. 57). Based on the review of the financial statements, I believe Microsoft has translated using the current rate method.  This is noted in the “Comprehensive Income Statements.” This presents a risk for Microsoft because the investments are predominantly U.S. dollar-denominated securities but also include foreign currency which presents a rate risk.

The footnotes disclosures that were provided in the financial statement that are related to foreign currency transactions pertain only to hedging. It mentions that “certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk” (SEC, pg. 69).  So basically, these transactions are monitored carefully to maximize the economic effectiveness of their foreign currency hedge positions.

Reference:

U.S. Securities and Exchange Commission (SEC). 2016. Microsoft Corporation. 10-k. Retrieved on Nov. 17, 2016 fromhttps://www.sec.gov/Archives/edgar/data/789019/000119312516662209/d187868d10k.htm.