The Portable MBA in Finance and Accounting, 3rd Edition

Global Finance 419

Storage Technology Corporation (1999)

Telef lex Inc. (1999)

Tenneco Inc. (1999)

Tiger International Inc. (1980)

Titan International Inc. (1999)

UAL Inc. (1999)

Vishay Intertechnology Inc. (1999)

Western Digital Corporation (2000)

York International Corporation (1999)

NOTES

1. Western Digital Corporation, annual report, June 2000, 25–26.


2. Baltek Corporation, annual report on Form 10-K to the Securities and Ex-
   change Commission, December 1999, 3.


3. It is unlikely that either side of the transaction would be indifferent to this
   matter. Insisting upon being invoiced by a foreign supplier in your own currency
   means that the supplier must bear the currency risk. The supplier will have a foreign-
   currency receivable. It is reasonable to expect the foreign supplier to attempt to be
   compensated for bearing this currency risk by charging a higher price for its product.


4. A U.S. electronics company recently attempted to eliminate currency risk by
   having its Japanese supplier invoice them in the U.S. dollar. The Japanese supplier
   agreed to do this and introduced a new schedule of prices in dollars. The U.S. com-
   pany deemed the increases to be so high that they decided to continue to be invoiced
   in the Japanese yen and to manage the associated exchange risk.


5. Each of the actual case examples discussed in this section are treated in more
   detail, including income tax and cash-f low issues, in E. Comiskey and C. Mulford,
   “Risks of Foreign Currency Transactions: A Guide for Loan Officers,” Commercial
   Lending Review (summer 1990), pp. 44– 60.


6. Air Canada, annual report, December 1999 (emphasis added). Information
   obtained from Disclosure, Inc., Compact D/SEC: Corporation Information on Public
   Companies Filing with the SEC (Bethesda, MD: Disclosure Inc., June 2000).


7. On January 1, 1999, 11 of the 15 member countries of the European Union
   adopted the Euro as their common legal currency and established fixed conversion
   rates between their sovereign currencies and the Euro.


8. Holding foreign currency cash, that is, an asset balance, would be consistent
   with the need to offset existing liability exposure in these foreign currencies. Alter-
   natively, borrowing in foreign currencies to produce a hedge implies existing asset ex-
   posure in these foreign currencies.


9. California First Bank, annual report, December 1987, 20.


10. Federal Express Inc., annual report, December 1989, 35.


11. The accounting treatment to insure that the offsetting gains and losses are
    included in the income statements at the same time was described by Federal