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2 pages/β‰ˆ550 words
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Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Case Study
Language:
English (U.S.)
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MS Word
Date:
Total cost:
$ 18.72
Topic:

Types of Hedges Requiring Special Accounting

Case Study Instructions:

My company is Starbucks: every student should develop throughout the course the analysis of the respective topic from the designated company; First you need to describe the most important aspect from the topic of the week that is directly related with your company YOU NEED TO READ THE MATERIAL OF THE WEEK IN THIS CASE FOR WEEK 2 IS FINANCIAL REPORTS AND ETHICS, you need to mention briefly the main idea of the topic YOU MUST RESUME THE MOST IMPORTANT IDEAS FROM THE TOPIC. Then for your company report you should include every component and explanations from the last 3 years related specifically for the topic of the week. AGAIN LAST 3 YEARS. HERE READING THE 10K SEC REPORT YOU ARE GOING TO SEE HOW DOES WORK THE TOPIC INSIDE YOUR COMPANY, YOU MUST EXTRACT THAT INFORMATION FOR YOUR WEEKLY REPORT.
According with the Course Schedule Table we have every week one new topic, from the last 3 years 10K SEC Report you should make one report every week for that particular topic extracted from your company.
The Requisites for the report are as follows, minimum two pages, Single Space, Font Size 10, no spaces between paragraphs, 1 inch margin and font Times New Roman. Here is briefly what I expect from your weekly company report, the description of the weekly topic, the description of what is or how is related with your company and why is so important, then bring the operational process, how the company describe that particular topic from the last 3 years.
For more information about your company, visit www(dot)finance(dot)yahoo(dot)com then type your Ticker Company, then go Company section and click SEC FILLINGS after that click the 10K SEC REPORT or ANNUAL REPORT

Case Study Sample Content Preview:
Hedging and Derivatives
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Hedging
Introduction
Hedging is a technique used to reduce investment risk by making an offsetting investment. It is use of strategies designed to reduce potential loss. For instance, one may purchase a second investment to perform in an opposite direction with the first one. Hedging is extremely important in companies as they try to reduce risks, it is however guided by some underlying premises, the derivatives, all assets, which represent rights or obligations should be reported in financial statements, they should be measured at fair value with any adjustments in the carrying amounts reflecting changes in their fair value. Special accounting for items which are being hedged should only be provided for qualifying transactions. The various types of hedges require special accounting as discussed in this paper.
Fair Value Hedges
This kind of hedge helps to shield against the effect of changes caused by fixed terms, rates or prices. For instance, a fixed rate debt with variable rate of interest would result in the debtor paying higher than market interest rates with a decline in the interest rates. The company will then be required to recognize the hedged item in the income statement in the period that the value changes occur, either as a gain or a loss. Hedging activity should be made after an agreement with the two concerned parties therefore binding on both parties and legally enforceable. In case the hedge is ineffective; this should also be reported in the financial statements so as to recognize the changes in fair value of the derivative or the hedged item. Assets which are denominated in foreign currency are measured at spot rates. Starbucks Company hedges their equity method investment in Starbucks Coffee Japan through net investment derivative instruments; this minimizes their exposure to foreign currency. For instance, the net investment hedges of $12.9 million and $ 33.6 million net of taxes were included in the accumulated other comprehensive income in September 2013. To mitigate the risk of translation of various balance sheet items, the Company enters into foreign currency swap contracts not necessarily outlaid as hedging instruments. The Company also enters into futures contracts not designated as hedging instruments to reduce the risk of uncertainty of their future purchases for example the dairy products. For the diesel fuel the Company enters into swap contracts still not designated as hedging instruments. These contracts, the future contracts and the swap contracts, are recorded at fair value. Any changes in the in the fair value is recognized in net interest income and other in the income statement. Any gains or losses incurred from these instruments are usually offset by price fluctuations in the Company's purchases which are part of the cost of sales.
Cash flow Hedges
This type of hedging is used by Companies to mitigate risks caused by changes in prices, costs, rates or other items that bring uncertainties in future cash flows. It is a hedge of a transaction expected to occur in future but the transaction amount is yet to be determined. In some cases the forecasted transaction concerns a requirement in contractual...
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