DISCLOSURE OF FOREIGN CURRENCY RISK AND CORRESPONDING MIТIGATING TOOLS ВУ ТНЕ МЕТАL PRODUCING COМPANIES' IN THEIRANNUAL REPORTS FOR2014

Abstract

This рарег reviews information on foreign exchange 1·isk factors and the corresponding risk reducing techniques, disclosed Ьу 32 laгgest global steel producing companies in their annual repo1is for 2014. According to the materiality principle, it is а natural assumption that annual reports disclose the most significant 1·isk factors. Extensive research 1·esulted in identifying 17 risk factors with total frequency of 61. Eleven of these risk factors relate to the transaction risk, with total frequency of 49, which rep1·esents 80.3% of risk factors in total. The most significant risk factor refers to purchases of irnportant inputs that are denominated in foгeign currencies, with а frequency of 21, which represents 34.4% of 1·isk facto1·s in total. These risk factors are the ones that companies гecognize as ones with the most significant impact оп their assets, operating costs, eamings and futuгe cash flows, financial 1·esult, financial condition, business and future prospects. The analysis of hedging tools used Ьу the companies, reveals that most companies hedge their risk Ьу using financial derivatives. Having in mind that mining is the long-teпn business, we сап conclude that companies mitigate their short and medium-te1·m transaction risk Ьу financial deгivatives. Companies do not seem to Ье concemed with...