We hold equity interests in two wireless communications operations in Brazil. During January 1999, the government of

Question:

We hold equity interests in two wireless communications operations in Brazil. During January 1999, the government of Brazil allowed its currency to trade freely against other currencies. As a result, the Brazilian Real experienced devaluation against the U.S. Dollar. The devaluation resulted in the entities recording exchange losses related to their net U.S. Dollar-denominated liabilities. Our share of the foreign losses for the first quarter was $280. These exchange losses are subject to further upward or downward adjustment based on the fluctuations in the exchange rates between the U.S. Dollar and the Brazilian Real. In a press release announcing the first quarter 1999 results, BellSouth provided the following information (as found on the company€™s Web site): BellSouth (NYSE:BLS) reported a 15-percent increase in first quarter earnings per share (EPS) before special items. EPS was 46 cents before a non-cash expense of 14 cents related to Brazil€™s currency devaluation.
BellSouth Earnings Summary ($ in millions, except per share amounts) (unaudited)

Required:
Given the disclosure provided by BellSouth Corporation, answer the following questions:
1. Why did the company report a foreign currency loss as a result of the devaluation of the Brazilian Real?
2. What does the company mean when it states: €œThese exchange losses are subject to further upward or downward adjustments based on fluctuation in the exchange rates between the U.S. Dollar and the Brazilian Real?€
3. What is the company€™s objective in reporting €œNormalized Net Income€? Do you agree with the company€™s assessment that it has a 15 percent increase in first-quarter earnings pershare?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...