Analyze the main reasons why a company might prefer a foreign currency

| September 2, 2016

Question
Analyze the main reasons why a company might prefer a foreign currency option over a forward contract in hedging a foreign currency firm commitment. In contrast, analyze the main reasons why a company might prefer a forward contract over an option in hedging a foreign currency asset or liability. Determine the option (i.e., a foreign currency option or a forward contract) that you consider to be more effective. Provide a rationale for your response.

Assume that all the companies in the world use International Financial Reporting standards (IFRS). Determine at least two (2) obstacle to the worldwide comparability of financial statements, and provide one (1) strategy to overcome the obstacles in question. Provide support for your rationale.

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