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ItemClimate Policies with Burden Sharing: The Economics of Climate Financing( 2017-09-01)The maintenance of a favorable climate accounts for the most challenging contemporary global governance predicament that seems to pit today’s generation against future world inhabitants. In a trade-off of economic growth versus sustainability, a broad-based international coalition could establish climate justice. As a novel angle towards climate justice, the following paper proposes (1) a well-balanced climate mitigation and adaptation public policy mix guided by micro- and macroeconomic analysis results, and (2) a new way of funding climate change mitigation and adaptation policies through carbon tax and broad-based climate bonds that also involve future generations. Contemporary climate financing strategies (e.g., Sachs Model) are thereby added into Integrated Assessment Models of the Nordhaus Type. Overall, the paper strives to delve deeper into a discussion of how market economies can be brought to a path consistent with prosperity and sustainability. Finding innovative ways how to finance climate abatement over time coupled with future risk prevention as well as adaptation to higher temperatures appears as an innovative and easily-implementable solution to nudge overlapping generations towards climate justice in the sustainability domain.
ItemACCOUNTING FOR FOREIGN CURRENCY TRANSACTIONS WITH HEDGING DERIVATIVES: A TUTORIAL( 2017-04-27)This article provides students with a tutorial to learn accounting for derivative instruments and hedging activities on foreign currency transactions. It can be used in courses that discuss derivative instruments, such as advanced accounting, international accounting, or in a company’s training program. The tutorial helps students develop critical thinking skills in analyzing the impact of different hedging strategies on a firm’s financial statements. The included scenario demonstrates how a US importer uses foreign currency derivatives (forward contract vs. option) to hedge exchange rate fluctuations of a liability (foreign-currency-denominated accounts payable). This situation is applied across five cases to provide a comparative analysis of the reporting results from the use of different accounting treatments (fair value hedge vs. cash flow hedge) for the two derivatives. The base case, Case 0, demonstrates the impact of not using a derivative to mitigate market risk. Cases 1 and 2 demonstrate the application of a fair value hedge in using a forward contract vs. option. Cases 3 and 4 illustrate a cash flow hedge. The tutorial scenario begins with foreign currency appreciation. To ensure learning on the tutorial, a student project is provided in Appendix A when the exchange rates are expected to be volatile. Students are further asked to write a memo to recommend a hedging strategy after technical analysis. By completing the project, students learn to apply critical thinking and communication skills, in addition to gaining technical accounting knowledge. The downloadable spreadsheets below are available to facilitate learning. Template: https://www.dropbox.com/s/1hdbhf5j85bwx97/FX_Payable-Template.xlsx Solution: https://www.dropbox.com/s/seudu9piv283cbi/FX_Payable-Solution.pdf?dl=0