Under what conditions can companies use hedge accounting to account for a foreign currency option used to hedge a forecasted foreign currency transaction?
Answer to relevant QuestionsHow are changes in the fair value of an option accounted for in a cash flow hedge? In a fair value hedge?On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract ...On December 1, 2011, Dresden Company (a U.S. company located in Albany, New York) purchases inventory from a foreign supplier for 60,000 local currency units (LCU). Dresden will pay in 90 days after it sells this ...On June 1, Hamilton Corporation purchased goods from a foreign supplier at a price of 1,000,000 markkas. It will make payment in three months on September 1. On June 1, Hamilton acquired an option to purchase 1,000,000 ...Many companies make annual reports available on their corporate Internet home page. Annual reports also can be accessed through the SEC’s EDGAR system at www.sec.gov (under Filing Type, search for 10-K). Access the most ...
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