USA Hedging against translation exposure

[fils]

Hello,

First time poster, looking for some help.

We have a foreign subsidiary with a large cash balance in their functional currency (non-USD) and we are investigating hedging this balance to preserve the USD value. (I am assuming we (the parent) are doing this in anticipation of withdrawing funds in the future.)

How should the accounting be handled for this hedge? Would this qualify for fair value (balance sheet) hedge accounting or because the hedged item does not impact P&L (the translation gain/loss when consolidating statements would hit OCI) then it would be ineligible?

Let me know if any additional information would help. Thanks for your time.

 

[kirby]

Need to know.
What is parent's bookkeeping currency?
What is sub's bookkeeping currency and functional currency?
What currency is the large deposit in?
What instrument are you thinking about hedging with?

 

[bklynboy]

Check FAS 133 for US GAAP (ASC 815). This is discussed in detail and should address your specific item about hedge accounting for a net investment hedge. As long as you qualify for hedge accounting, the gain or loss is reported in OCI and I understand the ineffective portion of the hedge does run thru the P&L.