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Forex forward contract accounting


forex forward contract accounting

are traded on various exchanges around the world. If the transaction does not qualify as a hedge because it does not relate to a hedged item such as an asset or liability position, or firm commitment or an anticipated transaction, it is accounted for as a speculation in futures contracts. Case Example The following example illustrates accounting for futures contracts accounted for as hedge of an existing asset or liability position : On November 1, 2009, Lie Dharma Putra Inc. Deferred Gain on Futures Contract 24,000 Credit. Case Example The following example illustrates the accounting for futures contracts accounted for as a hedge when the hedged item is carried at market value : On November 1, 2009, Lie Dharma Putra, Inc. Payables to Futures Broker 100,000.

Unrealized Gain on Market Increase of Gold 900,000 This is to recognize the changes in the fair market value of the gold inventory which equals (530 500) x (30,000 troy ounces) 900,000. On the basis of the rates given above, the bankers selling rate for spot will be 218 if the customer wants delivery ready, and 216 will be 1 month fixed forward rate, if delivery is demanded at the end of one month. As an illustration, let us suppose the current"tion for dollar sterling in New York is: Spot month forward 3-2. Payable to Futures Broker 18,000 Credit. Payable to Futures Broker 900,000 Credit. The unrealized change in the fair value of the item can be accounted for under one of two options: either (1) charge it to net income or (2) maintain it in a separate stockholders equity account until sale or disposition of the hedged item. At the end of Year 1, the"d market price of the soybean contract.60 a bushel. All forward future contracts with an exchange broker have the following common characteristics : The need for an initial margin deposit, paid to the broker that represents a small portion of the futures contracts. The need to close out the account by either receiving or delivering the item, paying out receiving cash, or entering into an offsetting contract. The two conditions that need to be met are that: the hedged item is deliverable under contract; and the futures contract and the hedged item will be kept by the firm until the date of the delivery of the futures contract. Deposit with Futures Broker 240,000. Similarly, an importer, who was contracted to make payment of a given amount in dollar at the end of a given period, may find that at the time of payment, the rupee dollar rate is higher.

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