HEDGE ITEM

1-Oct Purchases
Accounts payable
31-Dec Forex loss
Accounts payable
1-Mar Accounts payable
Forex loss
Cash

820,000.00
820,000.00
80,000.00
80,000.00
900,000.00
20,000.00
920,000.00

HEDGE ITEM
1-Oct No entry

31-Dec No entry

31-Mar Purchases
Cash

Forex gain-OCI
Purchases
Forex loss-OCI

920,000.00
920,000.00

100,000.00
60,000.00
40,000.00

CASE 3
HEDGE ITEM
1-Oct

31-Dec Purchase commitment

40,000.00

Forex gain
31-Mar Forex loss
Purchase commitment
Purchases
Cash
Purchase commitment
Purchases

40,000.00
100,000.00
100,000.00
920,000.00
920,000.00
60,000.00
60,000.00

CASE 4
hedge item

hedging instrument
Case 1 entries

no entries

SELLER'S POINT OF VIEW

Hedged Item
31-Oct Accounts Receivable
Sales

820,000.00

31-Dec Accounts Receivable

Forex gain

80,000.00

820,000.00

80,000.00

Purchases are recorded at spot rate

Exposed liability

HEDGING INSTRUMENT - FORECASTED TRA

1-Oct

31-Dec

31-Mar

HEDGING INSTRUMENT
Forward contract receivable
Forward contract payable
Forex loss
Forward contract receivable

860,000.00
860,000.00
40000
40000

Forward contract receivable

Forex gain

100,000.00

Forward contract payable

Cash

860,000.00

100,000.00

860,000.00

Foreign currency
Forward contract receivable

920000

Cash
Foreign currency

920000

ging instrument
e 1 entries

920000

920000

HEDGE INTRUMENT
Gross
VARIABLE
FIXED

Forward contract receivable

Forward contract payable

860,000.00

Forex loss
Forward receivable contract
Forward contract receivable
Forex Gain

100,000.00

Forward contract payable

Cash

860,000.00

Foreign currency (cash account)

Forward receivable contract

920,000.00

1-Oct Derivative
31-Dec
31-Mar

40,000.00
60,000.00

GING INSTRUMENT - FORECASTED TRANSACTION - CASH FLOW HEDGE

Forward contract receivable
860,000.00
Forward contract payable
Forex loss - OCI
Forward contract receivable

40,000.00

Forward contract receivable

Forex gain -OCI

100,000.00

Forward contract payable

Cash

860,000.00

Foreign currency (cash account)

Forward contract receivable

920,000.00

Cash
Foreign currency

40,000.00

860,000.00

40,000.00

100,000.00

860,000.00

920,000.00
920000
920,000.00

Net (difference)
860,000.00

40,000.00

No entry
Forex loss
Forward receivable contract

Forward contract receivable

100,000.00 Forex Gain
Foreign currency (cash account)
860,000.00 Cash
Forward receivable contract
920,000.00

40,000.00
40,000.00
100,000.00
100,000.00
920000
60,000.00
860,000.00

HEDGING USING FORWAD CONTRACT - BUYER'S POINT OF VIEW

Case 1 Exposed Asset or Liability (Not a Hedge Accounting)
ITEM
INSTRUMENT
1-Oct-15 Purchases

820,000.00

Accounts payable
31-Dec-15 Forex loss

820,000.00

Forward contract receivable

Forward contract payable

80,000.00

Forex loss
Forward receivable contract

80,000.00

Accounts payable
31-Mar-16 Accounts payable

900,000.00
20,000.00

Forex loss
Cash

Forward contract receivable

Forex Gain
920,000.00
Forward contract payable
Cash
Foreign currency (cash account)
Forward receivable contract

Case 2 Forecasted Transaction (Cash Flow Hedge)

ITEM
1-Oct-15

31-Dec-15

INSTRUMENT

NO ENTRY

Forward contract receivable

Forward contract payable

NO ENTRY

Forex loss - OCI

Forward contract receivable

31-Mar-16 Purchases

920,000.00

Cash
Forex gain-OCI
Purchases
Forex loss-OCI

Forward contract receivable

920,000.00 Forex gain -OCI

100,000.00
60,000.00
40,000.00

Forward contract payable

Cash
Foreign currency (cash account)
Forward contract receivable
Cash
Foreign currency

Case 3 Firm Commitment (Fair Value Hedge or Cash Flow Hedge)

ITEM
1-Oct-15

INSTRUMENT
Forward contract receivable
Forward contract payable

NO ENTRY

31-Dec-15 Purchase commitment

40,000.00

Forex loss
40,000.00 Forward contract receivable

100,000.00

Forward contract receivable

100,000.00 Forex gain

Forex gain
31-Mar-16 Forex loss

Purchase commitment
Purchases
Cash
Purchase commitment
Purchases

920,000.00
920,000.00
60,000.00

Forward contract payable

Cash

Foreign currency
60,000.00 Forward contract receivable

Cash
Foreign currency
Case 4 Speculation (Not a Hedge Accounting)

ITEM
1-Oct-15

31-Dec-15

31-Mar-16

INSTRUMENT

NO ENTRY

Forward contract receivable

Forward contract payable

NO ENTRY

Forex loss
Forward receivable contract

NO ENTRY

Forward contract receivable

Forex Gain
Forward contract payable
Cash
Foreign currency (cash account)
Forward receivable contract
*SAME IN CASE 1

HEDGING USING FORWAD CONTRACT - SELLER'S POINT OF VIEW

Case 1 Exposed Asset or Liability (Not a Hedge Accounting)

ITEM
1-Oct-15 Accounts Receivable

INSTRUMENT
820,000.00

Sales
31-Dec-15 Accounts Receivable

80,000.00

Forex gain
31-Mar-16 Cash

Forward contract receivable

820,000.00 Forward contract payable
Forward contract payable
80,000.00 Forex gain

920000

Accounts Receivable
Forex gain

900,000.00
20,000.00

Forex loss
Forward contract payable
Cash
Forward contract receivable
Forward contract payable
Foreign currency

Case 2 Forecasted Transaction (Cash Flow Hedge)

ITEM
1-Oct-15

31-Dec-15

31-Mar-16 Cash

INSTRUMENT

No entry

Forward contract receivable

Forward contract payable

No entry

Forward contract payable

Forex gain-OCI
920000

Sales
Forex gain-OCI
Sales
Forex loss-OCI

920,000.00
40,000.00
60,000.00

Forex loss-OCI
Forward contract payable
Cash
Forward contract receivable

100,000.00

Forward contract payable

Foreign currency

Case 3 Firm Commitment (Fair Value or Cash Flow Hedge)

ITEM
1-Oct-15

INSTRUMENT
Forward contract receivable
Forward contract payable

No entry
40,000.00

31-Dec-15 Forex loss

Firm commitment

40,000.00

31-Mar-16 Firm commitment

100,000.00

Forex Gain
Cash
Sales

100,000.00

Forex loss-OCI
Forward contract payable

920,000.00

Cash
Forward contract receivable

920,000.00

Sales
Firm Commitment

Forward contract payable

Forex gain-OCI

60,000.00
60,000.00

Forward contract payable

Foreign currency

Case 4 SPECULATION (NOT A HEDGE ACCOUNTING)

ITEM
1-Oct-15

31-Dec-15

31-Mar-16

No entry

INSTRUMENT
Forward contract receivable
Forward contract payable

No entry

Forward contract payable

Forex gain-OCI

No entry

Forex loss-OCI
Forward contract payable
Cash
Forward contract receivable
Forward contract payable
Foreign currency

HEDGING USING OPTION CONTRACT - CALL OPTION

RUMENT
860,000.00

Case 1 - Exposed Asset or Liability (Not a Hedge Accounting)

ITEM
1-Oct-15 Purchases
659,000.00
860,000.00
Accounts payable

659,000.00

40,000.00
40,000.00

31-Dec-15 Forex loss

Accounts payable

700.00

31-Mar-16 Accounts payable

Forex gain

400.00

700.00

100,000.00
100,000.00

400.00

860,000.00
860,000.00
920,000.00
920,000.00 Case 2 Forecasted Transaction (Cash Flow Hedge)

ITEM

RUMENT

1-Oct-15
860,000.00

860,000.00

40,000.00

40,000.00

100,000.00

100,000.00

NO ENTRY

31-Dec-15

860,000.00

860,000.00

920,000.00

920,000.00

920,000.00

NO ENTRY

31-Mar-16 Purchases
Cash
Forex gain-OCI
Purchases
Forex loss-OCI

659,300.00
659,300.00
700.00
300.00
400.00

Case 3 Firm Commitment (Fair Value Hedge or Cash Flow Hedge)

ITEM
1-Oct-15
920,000.00
NO ENTRY

RUMENT
860,000.00

31-Dec-15 Forex loss

Firm Commitment

700.00

31-Mar-16 Firm Commitment

Forex gain

400.00

700.00

860,000.00
40,000.00

400.00

40,000.00

Purchases
Cash

100,000.00

659,300.00
659,300.00

100,000.00

Firm Commitment
Purchases

860,000.00
860,000.00
920,000.00
920,000.00

300.00
300.00

920,000.00
920,000.00

Case 4 Speculation (Not a Hedge Accounting)

RUMENT

ITEM
1-Oct-15

860,000.00

NO ENTRY

860,000.00

31-Dec-15

40,000.00

NO ENTRY

40,000.00

31-Mar-16

100,000.00

NO ENTRY

100,000.00
860,000.00
860,000.00
920,000.00
920,000.00

RUMENT
860,000.00

HEDGING USING OPTION CONTRACT - PUT OPTION

Case 1 - Exposed Asset or Liability (Not a Hedge Accounting)
ITEM
1-Oct-15 Accounts receivable
442,000.00
Sales
442,000.00
31-Dec-15 Accounts receivable
Forex gain

100.00

31-Mar-16 Forex loss

Accounts receivable

500.00

Cash
Accounts receivable

441,600.00

100.00

860,000.00
40,000.00

500.00

40,000.00
100,000.00

441,600.00

100,000.00
860,000.00

920,000.00

Case 2 Forecasted Transaction (Cash Flow Hedge)

ITEM
860,000.00
1-Oct-15
NO ENTRY
920,000.00

31-Dec-15

NO ENTRY

RUMENT
860,000.00
860,000.00
40,000.00
40,000.00
100,000.00
100,000.00
860,000.00
860,000.00

31-Mar-16 Cash
Sales
Forex gain-OCI
Gain on put option

441,600.00
441,600.00
400.00
400.00

920,000.00
920,000.00

860,000.00
860,000.00
40,000.00
40,000.00
100,000.00
100,000.00

Case 3 Firm Commitment (Fair Value or Cash Flow Hedge)

ITEM
1-Oct-15
No entry
31-Dec-15 Sales commitment
Forex gain

100

31-Mar-16 Forex loss

Sales commitment

500

860,000.00

Cash
Sales

920,000.00

Sales commitment
Gain on put option

860,000.00

920,000.00

860,000.00
860,000.00

40,000.00

31-Mar-16

100,000.00
100,000.00
860,000.00
860,000.00
920,000.00
920,000.00

500
441600
441600
400
400

Case 4 SPECULATION (NOT A HEDGE ACCOUNTING)

ITEM
1-Oct-15
No entry
31-Dec-15

40,000.00

100

No entry

No entry

LL OPTION (RIGHT TO BUY)

Call option
Cash

INSTRUMENT
1,000.00
1,000.00

Call option
Forex gain

2,700.00

Forex loss
Call option

3,400.00

Foreign currency
Call option
Cash

Call option
Cash

2,700.00

3,400.00
659,300.00
300.00
659,000.00
INSTRUMENT
1,000.00
1,000.00

Call option
Forex gain-OCI
Forex gain-P/L

2,700.00

Forex loss-OCI
Forex loss-P/L
Call option

400.00
3,000.00

Foreign currency
Call option
Cash

Call option
Cash

700.00
2,000.00

3,400.00
659,300.00
300.00
659,000.00
INSTRUMENT
1,000.00
1,000.00

Call option
Forex gain

2,700.00

Forex loss
Call option

3,400.00

Foreign currency
Call option
Cash

2,700.00

3,400.00
659300
300
659000

Call option
Cash

INSTRUMENT
1,000.00
1,000.00

Call option
Forex gain

2,700.00

Forex loss
Call option

3,400.00

Foreign currency
Call option
Cash

2,700.00

3,400.00
659,300.00
300.00
659,000.00

T OPTION (RIGHT TO SELL)

Put option
Cash

INSTRUMENT
2,000.00
2,000.00

Forex loss
Put option

500.00

Forex loss
Put option

1,100.00

Cash
Put option
Foreign currency

Put option
Cash
Forex loss-P/L
Put option

Forex loss-P/L
Forex gain-OCI
Put option
Cash
Put option
Foreign currency

500.00

1,100.00
442,000.00
400.00
441,600.00

INSTRUMENT
2,000.00
2,000.00
500.00
500.00

1,500.00
400.00
1,100.00
442,000.00
400.00
441,600.00

Put option
Cash

INSTRUMENT
2,000.00
2,000.00

Forex loss
Put option

500.00

Forex loss
Put option

1,100.00

Cash
Put option
Foreign currency

INSTRUMENT
Put option
Cash

500.00

1,100.00
442,000.00
400.00
441,600.00

2,000.00
2,000.00

Forex loss
Put option

500.00

Forex loss
Put option

1,100.00

Cash
Put option
Foreign currency

500.00

1,100.00
442,000.00
400.00
441,600.00

If the forward contract is not designated as a hedge = the rate to be used is the forward rate at the da
If the firm purchase commintment is designated as a hedge = the rate to be used is the forward rate a
Forward currency unit payable should be recorded at forward rate on the date of hedging
Seller
Buyer
Forward rat>
Spot rate Premium Premium
Revenue Expense
Purchase commitmentrate decreases

loss

export

Sales commitment

gain

import

rate decreases

Noncancellable purchase agreement

(at the date of delivery)

spot rate

Forward contract payable = Purchases at the date of settlement

he forward rate at the date of purchase

used is the forward rate at the date of purchase
e of hedging