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Question #3: Rolls-Royce Canada, based in Montreal, overhauls and services Rolls-Royce aircraft engines for major American and Canadian Airlines; with 95% of the revenue stream
Question #3: Rolls-Royce Canada, based in Montreal, overhauls and services Rolls-Royce aircraft engines for major American and Canadian Airlines; with 95% of the revenue stream in $USD from US based carriers. The parent company, Rolls-Royce plc., based in the United Kingdom, manufactures and supplies all jet engine components and parts to its subsidiaries worldwide and invoices foreign subsidiaries in $US dollars. The Vice-President, Finance of Rolls-Royce Canada prepares a three month rolling $USD cash flow forecast of inflows from US customers and outflows to the parent company and purchases forward contracts, as needed, to cover any exposed net cash flow position on an ongoing basis. Does this activity require the adoption of hedge Accounting? Why or Why not
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