风险管理案例研究(Case Study)

风险管理案例研究


Risk Management Case Studys Finance Essay

The financial statements are prepared under the historical cost convention, ongoing concern basis and in terms of the Accounting Standards. The Company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis to the extent measurable and where there is certainty of ultimate realization in respect of incomes.

 

In case of foreign subsidiaries, being non-integral operations, revenue items are consolidated at the average exchange rate prevailing during the year. All assets and liabilities are converted at the rates prevailing at the end of the year. Any exchange difference arising on consolidation is recognized in the foreign currency translation reserve.

 

The difference between the cost of investment in the subsidiaries and joint ventures and the Company's share of net assets at the time of acquisition of shares in the subsidiaries and joint ventures is recognized in the financial statements as goodwill or capital reserve as the case may be.

Risk management:-

 

The Company has been availing various types of financial facilities from Banks, Financial Institutions, and other lenders in India and/or abroad for meeting fund requirements for implementing the projects, expansion plans and working capital. Options available in the credit market are properly assessed and sufficient cares is taken to avail these facilities at competitive terms and conditions and are appropriately secured as per terms of sanction. The borrowings are at competitive cost and their disbursement is linked to the project/working capital requirements. Senior managerial personnel are looking after the arrangement of funds, servicing of debts and management of internal accruals

 

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

 

Income and expense items are translated at exchange rate at the date of transaction for the year; and all resulting exchange differences are accumulated in a foreign currency translation reserve until the disposal of the net investment.

 

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

 

风险管理-Risk management:

 

The Company's activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative financial instruments such as foreign exchange contracts, Option contracts and interest rate swaps to manage its exposures to interest rate and foreign exchange fluctuations.

 

Exchange differences on forward exchange contracts & plain vanilla currency options for establishing the amount of reporting currency and not intended for trading & speculation purposes, are recognized in the Profit & Loss account in the period/year in which the exchange rate changes.

 

 

The accompanying unaudited condensed consolidated interim financial statements have been prepared in Indian rupees. Solely for the convenience of the reader, the unaudited condensed consolidated interim financial statements as of and for the six months endedSeptember 30, 2008 have been translated into United States dollars at the noon buying rate in New York City on September 30, 2008 for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York of U.S.$1.00 = Rs.46.45. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate.

 

风险管理政策-Risk management policy

 

The Company uses foreign exchange forward contracts and options to hedge its movements in foreign exchange rates and does not use the foreign exchange forward contracts and options for trading or speculative purposes .Foreign currency transactions and balances: Foreign currency transactions are recorded using the exchange rates prevailing on the dates of the respective transactions. Exchange differences arising on foreign currency transactions settled during the year are recognized in the Profit and Loss Account

 

Use of estimates: The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods

 

All transactions in foreign currency are recorded at the rates of exchange prevailing on the dates when the relevant transactions take place;

 

Monetary items in the form of Loans, Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted during the year;

 

In respect of Forward Exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Further, the exchange differences arising on such contracts are recognized as income or expense along with the exchange differences on the underlying assets / liabilities. Further, in case of other contracts with committed exchange rates, the underlying is accounted at the rate so committed. Profit or loss on cancellations / renewals of forward contracts is recognized during the year. In case of option contracts, the losses are accounted on mark to market basis

 

Foreign currency revenues, on the other hand, are short-term and unpredictable, in line with the short-term nature of forward contracts. A survey done by Marshall (2000) also points out that currency swaps are better for hedging against translation risk, while forwards are better for hedging against transaction risk.

 

Accounting exposure, also called translation exposure, results from the need to restate foreign subsidiaries' financial statements into the parent's reporting currency and is the sensitivity of net income to the variation in the exchange rate between a foreign subsidiary and its parent.

 

The main advantage of a forward is that it can be tailored to the specific needs of the firm and an exact hedge can be obtained.

 

The company uses various hedging strategies like forwards, futures, swaps, and foreign debt which is used to hedge foreign exchange exposure by taking advantage of the International Fischer Effect relationship.

 

雀巢公司-NESTLE
 

The functional currency of the Group's entities is the currency of their primary economic environment. In individual companies, transactions in foreign currencies are recorded at the rate of exchange at the date of the trans-action. Monetary assets and liabilities in foreign currencies are translated at year-end rates. Any resulting exchange differences are taken to the income statement. On consolidation, assets and liabilities of Group entities reported in their functional currencies are translated into Swiss Francs, the Group's presentation currency, at year-end exchange rates. Income and expense items are trans-lated into Swiss Francs at the annual weighted average rate of exchange or at the rate on the date of the transaction for significant items. Differences arising from the retranslation of opening net assets of Group entities, together with differences arising from the restatement of the net results for the year of Group entities, are recognised in other comprehensive income. The balance sheet and net results of Group entities operating in hyper inflationary economies are restated for the changes in the general purchasing power of the local currency, using official indices at the balance sheet date, before translation into Swiss Francs at year-end rates

 

风险管理政策-RISK MANAGEMENT POLICY

 

The Group designates and documents certain derivatives as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges), highly probable forecast transactions (cash fl ow hedges) and hedges of net investments in foreign operations (net investment hedges). The effectiveness of such hedges is assessed at inception and verified at regular intervals and at least on a quarterly basis, using prospective and retrospective testing. The Group uses fair value hedges to mitigate foreign currency and interest rate risks of its recognized assets and liabilities. The changes in fair values of hedging instruments are recognized in the income statement. Hedged items are also adjusted for the risk being hedged, with any gain or loss being recognized in the income statement.