>>From the looks of your statement, you a) don't understand the accounting rules...
I'm not going to get into a debate on whether a company can mix a forex contract loss into cost of revenues - they can't - and its
certainly not analogous to buying buckets for a lemonade operation.
You are comparing it to a mining company that has sold forward its
product under a contract and thus the effect would be included in revenues. Seagate did not sell forward any hard drives - there is no such contract (though I'd like to see one for chips, at least.) they merely attempted to keep their costs stable by hedging against a strengthening in the SE Asian currencies, which is the right move for
the company.... if they're going to keep the hedge on at all times, year after year, that is. Such actions ultimately improve consistency of results. When the currencies weakened, SEG lost money on the forex instruments which was partially offset by cheaper costs incurred in the respective regions... as you mentioned earlier, they simply did not benefit from the weaker currencies because the boon was offset by the forex instrument losses.
Hedging in multiple currencies yields detailed records reported to the IRS, whereby the matter is taxed as gains & losses and SEG can not craftily meneuver this into cost of revenues. Cost of revenues cannot contain such an item, which is non-operating anyway so it can't be in General & Admin., either.
A gain on a forex contract can not be taxed as income - it is taxed
as a gain.
p.s., yes it decreased slightly the month after - not at the end of
the month where the intervention took place. |
