What is the meaning of the term "Netting" with reference to Foreign Currency Transactions?

Foreign Currency NettingThere are circumstances where a company has subsidiaries in multiple countries that actively trade with each other. If so, they should have accounts receivable and payable with each other, which could give rise to a flurry of foreign exchange transactions in multiple currencies that could trigger any number of hedging activities. It may be possible to reduce the amount of hedging activity through payment netting, where the corporate parent offsets all accounts receivable and payable against each other to determine the net amount of foreign exchange transactions that actually require hedges.