hard · 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, because the loan is a monetary liability
- As an adjustment to the carrying value of the investment in the subsidiary
- Partially in Net Income and partially in OCI based on hedge effectiveness
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