Foreign exchange risk arises when: A)business transactions are denominated in foreign currencies. B)sales are made to customers in a foreign country. C)goods or services are purchased from suppliers in a foreign country. D)accounting reports are prepared in a foreign currency.

Assume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order to result in a current-year remeasurement loss and how the company could use a foreign currency loan receivable or payable to hedge against its net investment in the foreign subsidiary.

Which of the following items will result to foreign currency transaction gain/loss due to settlement or remeasurement? Foreign currency denominated non-monetary liabilities such as unearned revenue, warranty liability, premium liability and deferred tax liability.   Foreign currency denominated non-monetary assets such as inventory, PPE, intangible asset or prepaid asset.   Foreign currency denominated monetary items such as accounts payable, accounts receivable, notes payable, loans receivable or interest payable.   Foreign currency denominated income statement accounts such as revenue, income, expense or loss.