Investors want to be able to forecast a business’ future cash flows. But they tell us that disclosures around foreign currency and hedging can make that task a challenge. In this ‘Investor view’, we look at what improvements to disclosure could benefit companies.
Investors want to understand the extent to which an entity’s underlying performance is affected by foreign exchange (FX) and any strategy in place to mitigate foreign exchange risk.
Current financial reporting standards only require disclosure of foreign exchange gains and losses as a single number, which is recorded in the income statement. Investors tell us that this is not enough.
The foreign exchange information that analysts around the world tell us they are most interested in is:
This understanding of the entity’s strategy for managing FX exposure gives investors genuine insight into the quality and sustainability of performance.