1. Sony Corporation reported the following in the summary of Significant Accounting Policies included in the company’s 2012 annual report on Form 20-F (p. F-16): Translation of Foreign Currencies All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at appropriate fiscal year end current exchange rates and all income and expense accounts are translated at exchange rates that approximate those rates prevailing at the time of the transactions. The resulting translation adjustments are accumulated as a component of accumulated other comprehensive income. Receivables and payables denominated in foreign currency are translated at appro- priate fiscal year end exchange rates and the resulting translation gains or losses are taken into income. Required: Explain in your own words the policies that Sony uses in reflecting in the fi- nancial statements the impact of changes in foreign exchange rates.

2. Sony Corporation reported the following in the Notes to Consolidated Financial Statements included in the company’s 2012 annual report on Form 20-F (p. F-49): Foreign Exchange Forward Contracts and Foreign Currency Option Contracts Foreign exchange forward contracts and purchased and written foreign currency option contracts are utilized primarily to limit the exposure affected by changes in foreign cur- rency exchange rates on cash flows generated by anticipated intercompany transactions and intercompany accounts receivable and payable denominated in foreign currencies. Sony also enters into foreign exchange forward contracts, which effectively fix the cash flows from foreign currency denominated debt. Required: Explain in your own words why Sony has entered into foreign exchange for- ward contracts and foreign currency option contracts.

3. Cooper Grant is the president of Acme Brush of Brazil, the wholly owned Brazilian subsidiary of U.S.-based Acme Brush Inc. Cooper Grant’s compensa- tion package consists of a combination of salary and bonus. His annual bonus is calculated as a predetermined percentage of the pre-tax annual income earned by Acme Brush of Brazil. A condensed income statement for Acme Brush of Brazil for the most recent year is as follows (amounts in thousands of Brazilian reals [BRL])

Sales . . . . . . . . . . . . . . . . . . . . . BRL 10,000
Expenses . . . . . . . . . . . . . . . . . .BRL 9,500
Pre-tax income. . . . . . . . . .BRL 500

After translating the Brazilian real income statement into U.S. dollars, the con- densed income statement for Acme Brush of Brazil appears as follows (amounts in thousands of U.S. dollars [US$])

Sales . . . . . . . . . . . . . . . . . . . . . . . . US $3,000
Expenses . . . . . . . . . . . . . . . . . . . . . US 3,300
Pre-tax income (loss) . . . . . . . . . . . . US $ (300)

Required:
a. Explain how Acme Brush of Brazil’s pretax income (in BRL) became a U.S.- dollar pretax loss.
b. Discuss whether Cooper Grant should be paid a bonus or not.

4. The New York Stock Exchange (NYSE) provides a list of non-U.S. companies listed on the exchange on its Web site (www.nyse.com). (Hint: Search the Inter- net for “NYSE List of Non-U.S. Listed Issuers.”)

Required:
a. Determine the number of foreign companies listed on the NYSE and the number of countries they represent.
b. Determine the five countries with the largest number of foreign companies listed on the NYSE.
c. Speculate as to why non-U.S. companies have gone to the effort to have their shares listed on the NYSE.

1. Sony Corporation reported the following in the summary of Signif...