Background: The workshop was conducted by the Eximius Centre at Bangalore on September 30, 2003. The objectives of the workshop were to educate the participants on various risks involved in foreign currency transactions/operations and methodology of hedging to avert such risks. The workshop also covered Accounting and Tax implications of foreign transactions and Accounting implications of Foreign Operations - Branches and Subsidiaries. The workshop covered case studies on best practices in foreign exchange risk management.

Faculty: The workshop was addressed by two eminent professionals in the fields of foreign exchange and Finance, Dr. Prakash Apte, Director, Indian Institute of Management, Bangalore and Prof. S. Sundararajan, Professor-Finance & Control, also from IIMB.

Target Sectors: The seminar was oriented towards targeting the industry and banks involved in foreign currency transactions and foreign operations.

Summary of Proceedings: In his introductory session, Prof. Apte listed out various corporate risks and emphasised the importance of market risks, wherein the exchange rate and interest rate risks become important aspects. The participants were briefed on various models of exchange rate forecasting. Prof. Apte classified the models in to two broad categories, viz., models based on some fundamentals and models based on technical analysis. The participants were briefed on important fundamentals that should be considered while building a model based on fundamentals. For undertaking technical analysis on various trends, Prof. Apte suggested to consider three important factors viz., volume, open interest on futures markets and price movements. The participants were explained how exchange rate, inflation and interest rates are interconnected.

In the next session, Prof. Apte briefed on the functions of global and domestic foreign exchange markets, factors determining country's spot exchange rates, identifying currency exposures, forecasting of future exchange rates and alternative hedging instruments and strategies. Prof. Apte presented many case studies to illustrate on the best practices in foreign exchange risk management.

In his presentation, Prof. S. Sundararajan briefed the participants on the accounting principles for foreign currency transactions and foreign operations with reference to International Accounting Standards (IAS-21) and its Indian counterpart Accounting Standards (AS-11) Revised 2003. The presentation compared these two accounting norms in terms of scope, accounting treatment and terminology. The participants were also briefed on the tax implications of a foreign activity of an Indian enterprise, tax incentives for earning foreign currency and tax implications of activities of foreign enterprises in India.