FX evaluation汇率影响评估

When FX ( CNY/USD) depreciate in March
FX loss on payable will be $0.51M – Suzhou FX gain on equity will be $0.51M – List Company
Conclusion: Overall FX impact is zero to Nexteer consolidation, the impact in 2014 are negative and for prior period equity are positive.
Legal entity name – Security Classification July 19, 2018 4
Example: $21M intercompany from list company
When list company lend $21M loan to Suzhou in Dec 2013
FX revaluation Impact April 2014
FX Impact on Balance Sheet
The Basic Formula for Balance Sheet:
Assets = Liabilities + Owners’ Equity
If all assets, liability and equity are in local currency, there will be no any foreign exchange risk for one company If parent company inject register capital in another currency ( USD as the example), there will be foreign exchange risk on parent company’s investment If some assets , liabilities are in USD, there will be foreign exchange risk on assets and liabilities, this is transaction FX gain and loss
wk.baidu.com
Legal entity name – Security Classification
July 19, 2018
3
Example: $21M allocation from US
When global allocate $21M expense to Suzhou in Dec
Payable increased by $21M – Suzhou Expense increased by $21M will make equity decreased the same amount – Suzhou
Loan increased by $21M – Suzhou Cash increased by $21M – Suzhou If we did not use the loan, FX impact will be zero As the loan are used to pay fixed assets or material, assets will be increased by $21M – Suzhou When FX ( CNY/USD) depreciate in March FX loss on loan will be $0.51M – Suzhou For the fixed assets portion, the D&A will be lower through the assets life and total amount equal the FX loss– Suzhou For the material portion, the inventory cost will be lower and total amount equal the FX loss– Suzhou Conclusion: Overall FX impact is zero to Nexteer Suzhou overall period
July 19, 2018
Legal entity name – Security Classification
2
Treasury principle
Nexteer Global treasury will review FX risk of all sites, and
match amount and period for assets ( AR , investment) and liability ( AP, loan) Nexteer Global treasury will buy the product to offset the exposure of un-matched foreign assets and liabilities
Legal entity name – Security Classification July 19, 2018 5