Forward contract outstanding at the balance sheet date

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i have one forward contract outstanding at the balance sheet, export in respect to that forward contract is made in next year. What should be the accounting treatment as per the guidance note of ICAI in this case. 

Replies (2)

Not recognised are, Foreign exchange forward contracts (or other financial instruments which in substance are forward contracts covered) by AS 11. I think you have this contract without Hedge option. 

This Guidance Note requires that all derivatives are recognised on the balance sheet and measured at fair value since a derivative contract represents a contractual right or an obligation. Fair value in the context of derivative contracts represents the ‘exit price’. Even if you have long or short position with Hedge option, guidances as per 2021 are given here: GN-on-Derivatives-Accounting-ICAI-1.pdf (taxconcept.net)

Forward Contracts NOT intended for trading or speculation purpose and entered into for the purpose of settlement of a particular asset/ liability on a future date;

To comprehend further: Follow the balance sheet date journals.

Tax treatment: The restatement exchange gain/loss on forward contracts shall be allowed as deduction in the year of restatement (i.e. on the basis of its unrealized status also). Check for deferred taxes possibility as well.

Recycling to me appears as revaluation as per As 11 aka PPE standards.

 


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