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Question
Refer to the 2003 IBM financial statement excerpts presented on the subsequent pages to answer these questions. All questions relate to fiscal year 2003 unless stated otherwise.
Required:
1. Explain the risks that IBM is trying to manage with its derivatives.
2. Explain how the gains and losses on the fair value hedges affect net income and other comprehensive income during 2003. Give specific accounts and amounts where possible.
3. Explain how the gains and losses on non-hedge/other derivatives affect net income and other comprehensive income during 2003. Give specific accounts and amounts where possible.
4. Explain how the gains and losses on the cash flow hedges affect net income and other comprehensive income during 2003. Give specific accounts and amounts where possible.
5. Was it a good idea for IBM to enter into its cash flow hedges?
Answer
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