Case Bell South Research Paper

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Bell South Analysis

Exchange rates have variations of value from one country to another based on the variations of market conditions. (Exchange rates and interest rates, 2011) Fluctuations in currency result from comparing the Brazilian real to the U.S. Dollar. Losses result when the Brazilian real is lower in value than the U.S. Dollar. Gains will result when the Brazilian real is higher in value than the U.S. Dollar. Because the market conditions fluctuate on a continual basis, the exchange rates will also fluctuate on a continual basis because the exchange rates are based on the market conditions.

Normalized income is earnings adjusted for cyclical ups and downs in economy or, on the balance sheet, earnings are adjusted to remove unusual or one time influences. (Normalized Earnings) As exchange rates fluctuate and cause gains or losses, earnings are also adjusted. The normalized income amount is the amount that is adjusted due to the changes in the exchange rates. The exchange rates will change the amount of normalized income each time they fluctuate and cause an adjustment to the amounts.

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Note E. explains that the Brazilian real had a period of devaluation. Compared to the U.S. Dollar the Brazilian real was less value than the U.S. Dollar. When currency experiences a devaluation in value, it means the valuation of the currency is less than the currency in the company's home country. The devaluation period actually means the Brazilian real had a period of decline in value compared to the U.S. Dollar. Each time it declines, it will cause more losses to earnings until the final adjustment is made on the settlement date.

The statement about the further upward and downward adjustments comes from the fact that exchange rates will continue to fluctuate as the market conditions continue to have ups and downs in the value of goods, services, and currency. The amounts in the normalized income and the amounts for the losses can go….....

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