Foreign Exchange Gains and Losses

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Information on foreign exchange gains and losses was disclosed in the statement of cash flows (Exhibit 2.28) and in the MD&A (Exhibit 2.30). The statement of cash flows disclosed foreign-currency losses of $1.9 million in 1995 and $8.9 million in 1996. A $6.1 million gain was disclosed in 1997. However, the MD&A disclosed a foreign-currency loss of $11.4 million for 1996 and a gain of $4.1 million for 1997. The foreign-currency items in the statement of cash flows represent recognized but unrealized gains and losses. As such, there are no associated cash inflows and outflows. However, the disclosures in the MD&A represent all of the net foreign-exchange gains and losses, both realized and unrealized. These are the totals that would have been added or deducted in arriving at net income and also represent the nonrecurring foreign currency gains and losses.

For 1996 and 1997, the Baker Hughes worksheet includes the foreign currency gain and loss disclosed in the MD&A, a loss of $11.4 million for 1996 and a gain of $4.1 million for 1997. In the absence of a disclosure of any foreign currency gain or loss in the MD&A for 1995, the worksheet simply included the $1.9 million loss disclosed in the statement of cash flows. Adjusting the foreign-currency gains and losses out of net income is based on a judgment that comparative performance is better represented in the absence of these irregular items.

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Basics Of Forex

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