$251 Million Loan for 38 Months at 11.48% APR |
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Mexcobre
Case
The Real World Case of a Controversial Accounting
for a Copper Swap that Challenges SFAS 133
Bob Jensen at Trinity University
Source: This case is rooted in a review of a real world copper swap reported by Paul B. Spraos in "The Anatomy of a Copper Swap," Corporate Risk Management and on "Mexcobre Loan Deal Repays Debt," Corporate Finance, August 1989. It is reproduced in Managing Financial Risk: A Guide to Derivative Products, Financial Engineering, and Value Maximization by C.W. Smithson, C.W. Smith, Jr., and D.S. Wilford (Chicago: Irwin Professional Publishing). These earlier references did not address accounting issues. The case has been modified somewhat in minor ways. The answers were prepared on the basis of a $251 million loan.
Acknowledgement: I am grateful to Rashad Abdel-Khalik for making me aware of this illustration during his presentation at the Tenth Asian-Pacific Conference on International Accounting Issues, Maui, October 26, 1998. Rashad sent me a photocopy of the Spraos article. I then wrote this Mexcobre Case for my students in ACCT 5341 in International Accounting Theories.
Table of Contents
Case Presentation and Answer Spreadsheets
Why do companies enter into interest rate swaps?
How did Sogem from Belgium hedge political risk?
How did a copper swap hedge copper price fluctuation risk?
Case Questions and Assignments
Click Here to Request Bob Jensen's Solutions to the Mexcobre Case
Bob Jensen's SFAS 133 Glossary and Transcriptions of Experts
Presentation Displays for the Mexcobre Case
Bob Jensen at Trinity University
Link to this file of the case and short answer summaries: http://www.trinity.edu/rjensen/caseans/133spshow.htm
Link to the case without answers: http://www.trinity.edu/rjensen/acct5341/133cases/133sp.htm
Link to the 133spans.xls Excel workbook that has the complete answer sheets:http://www.cs.trinity.edu/~rjensen/13300tut.htm
Link to the SFAS 133 and IAS 39 Glossary: http://www.trinity.edu/rjensen/acct5341/speakers/133glosf.htm
Links to related cases: http://www.trinity.edu/rjensen/acct5341/133cases/000index.htm
$251 Million Loan for 38 Months at 11.48% APR |
|
Excel Workbook of Answers to Mexcobre Case Questions
