BMW Research Project - Please Help !

motordavid · #28 11-19-2009, 10:40 PM

Quote:

Originally Posted by Tleong

I was told in my International Business class that locking in currency rates from a bank is usually only for a 90-180 day period...

Dunno...slept through that part of Money&Banking back in the mid 60s,
though currencies can and are, often "locked" via hedging another
currency or basket of currencies, and often "both ways"...

And, I would bet dinner that BMW hedges currencies. It is almost a must
for international companies like BMW. They are wrestling with Euros vs
USD, (for the most part), along with several other country sales, and
probably use hedging via Current Rate Method, as opposed to temporal method, in accounting.

Even at the lil' company I spent the last 11 years with, we hedged our fannies off, as we had mfg'ng sites
in several countries, with "local" sales, and "companies" set up, accounting-wise, in those countries, around the
world. BMW, et al, are no different; just a lot bigger than we were.

There is risk in hedging currencies, accounting-wise, balance sheet
noise, credit rating and ratios, and of course "translation risk" in
bringing those diverse numbers, from several currency "sources",
together in to a balance sheet that passes GAAP or the euro version
of GAAP. Off the soapbox...but, I bet currency fluctuation keeps
the CFO and his minions, awake some nights, even with hedging.