The following are the limitations of translation exposure, when
the company use hedging methods.
- When there is an estimation mistake in the hedging of
translation exposure, it will lead to increase of risk of
transaction expossure
- one of the hedging method is forward contract, But this forward
contract is not available in all currencies it is limitation. but
as far as Bartunek Company is concerned, euro forward contracts are
available.
- Since Bartunek Company needsto forcast the earnings of
the European subsidiaries, there may be chances of
making wrong forcast, which leads to a unfavourable result from the
hedging mothod.
- since the translation losses are only nothional losses, and is
arising as a result of translating of financial statements of
reporting entities, there is no question regarding the tax
deductibility.