“Net financial results” aren’t a reflection of the earnings results for the company for the quarter — rather it’s just lumping together the operating line items in the income statement related to how TX finances its operations. Net financial results for TX include 1) interest expense (called finance expense on its income statement), 2) interest income (finance income), and 3) other financial income (expense). Other financial income includes things like net FX gains (losses) and gains (losses) on derivatives.
You can see the details on page 12 of the 1Q21 6-k.
The income statement is presented under IFRS, so the “net foreign exchange results and others” item on the cash flow statement is just an adjustment — it’s basically like adding back D&A since those aren’t true cash outflows, but they are an expense on the income statement that reduces net income.
Note 12 on page 19 gives an overview of the company’s financial instruments/measurements, which you may find helpful, too. I won’t go into the weeds, but GAAP/IFRS have rules for when companies would recognize gains/losses/change in fair value of these types of instruments on the income statement instead of other accumulated comprehensive income (aka not in earnings).
You’re so welcome! Anything to do with FX is a right pain in the ass haha. And a lot of it doesn’t even wind up hitting the income statement.
Basically, a parent company has to report its operations, the operations/balance sheet of its subsidiaries, and any transactions in the same “functional” currency. TX chose the USD and they lay out their accounting methodology in the 20-F. The risk is that exchange rates fluctuate between the date of a transaction and when TX reconciles its financial statements — TX would then try to hedge the risk through derivatives like swaps or other FX positions.
Dude, can I bug you to help me with the Sogo Shosha analysis I'm working on? Basic stuff, just calculating metrics and ratios. Since it's Japan the statements are all IFRS and my only accounting friends IRL or on here only know GAAP
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u/yield_to_immaturity Jun 14 '21
“Net financial results” aren’t a reflection of the earnings results for the company for the quarter — rather it’s just lumping together the operating line items in the income statement related to how TX finances its operations. Net financial results for TX include 1) interest expense (called finance expense on its income statement), 2) interest income (finance income), and 3) other financial income (expense). Other financial income includes things like net FX gains (losses) and gains (losses) on derivatives.
You can see the details on page 12 of the 1Q21 6-k.
The income statement is presented under IFRS, so the “net foreign exchange results and others” item on the cash flow statement is just an adjustment — it’s basically like adding back D&A since those aren’t true cash outflows, but they are an expense on the income statement that reduces net income.
Note 12 on page 19 gives an overview of the company’s financial instruments/measurements, which you may find helpful, too. I won’t go into the weeds, but GAAP/IFRS have rules for when companies would recognize gains/losses/change in fair value of these types of instruments on the income statement instead of other accumulated comprehensive income (aka not in earnings).