The results for the US firms do not appear to be much different as again more than 90% hedge the transaction exposure from foreign currency denominated contractual commitments either intra-firm foreign repatriations (e.g. dividends, royalties, interest and payments on intracompany loans) are a special group of contractual commitments or anticipated transactions. Both in the US and in Germany more than one third of FX derivative using firms hedge these types of exposures frequently while another third does so sometimes. This practice implies that hedging decisions are taken from the perspective of parent company and its shareholders. It is interesting to notice that the new US draft-statement on accounting for derivatives now reflects this view and allows for hedge accounting for qualified hedges on intracompany transactions.

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The other component of economic exposure is operating exposure. This is the impact of current price changes on future non-contracted cash flows. In turn operating exposure can be broken into two components: the exposure of identifiable anticipated transactions and the exposure of unidentifiable future cash flows (competitive exposure). These are typically exposures for which firms do not receive hedge accounting treatment for the offsetting derivative positions. We first asked firms about their hedging of anticipated foreign currency transactions, both within the next 12 months (the budget period) and those beyond 12 months. For anticipated foreign currency transactions within the budgeting period (next 12 months) a majority (55.3%) of US firms use derivatives to “frequently” manage these uncommitted future cash flows, while another 36.5% do so “sometimes”. For the German firms we observe a slightly smaller percentage (70%) hedge this type of exposure at least “sometimes”. Thus, it appears that a large majority of US and German companies are concerned with the effect of exchange rate changes on the financial results of the budget year and therefore hedge exposures originating not only from contractual commitments but also from anticipated transactions.19 The hedging horizon for anticipated transactions is at least sometimes extended beyond one year by many US (54.2%) and German firms (46.7%); however, the percentage that do so frequently is dramatically lower in both countries.