medium · Financial Accounting liabilities-bonds-payable
A US parent designates a €50,000,000 EUR-denominated loan as a net investment hedge of its French subsidiary (functional currency: EUR). During the year, the EUR strengthens against the USD.
Where is the gain or loss on the loan reported in the consolidated financial statements?
- In Other Comprehensive Income (OCI), as part of the Cumulative Translation Adjustment
- In Net Income, since the EUR loan is classified as a monetary liability on the books
- As a direct adjustment to the carrying value of the investment in the subsidiary
- Split between Net Income and OCI, allocated according to measured hedge effectiveness
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