Academic journal article Journal of Accountancy
IFAC Issues Guidance on Risk Management and Strategic Planning
The International Federation of Accountants has released two statements on international management accounting practices (IMAP): a revision to IMAP no. 3, Currency Exposure and Risk Management, and IMAP no. 7, Strategic Planning for Information Resource Management.
The revision to IMAP no. 3 suggests various methods that can be used to manage foreign currency exposure. The statement does not analyze theory behind exchange rate fluctuations; instead, it recognizes that individual exchange rates remain highly sensitive to particular economic and political changes, and it explains how senior management, including financial and accounting managers, can take a proactive approach to managing their company's risk exposure.
The statement includes
* A list of)he various types of foreign currency exposure, such as transaction, translation and economic exposure, and an explanation of how management can identify them.
* Methods of assessing and forecasting foreign currency risk.
* A list of management techniques commonly used to manage currency exposure, including hedging and foreign exchange contracts.
* A brief overview of accounting, taxation and fiscal controls for foreign currency transactions.
IMAP no. 7 recommends ways companies can use information resources and systems effectively to meet company objectives. According to the statement, most businesses recognize that data need to be managed, but relatively few recognize that information in databases often provides the means to rapidly propel organizations ahead of their competitors. IMAP no. 7 provides some background for companies to plan and implement new methods of capitalizing on their information assets.
Copies of IMAP no. 3 and IMAP no. 7 are available for $10 each by calling the IFAC at (212) 302-5952, or by faxing (212) 302-5964. …