Can anyone pl guide me regarding accounting treatment/entries of currency option trading ?
1 Replies
Rineesh Raghavan
(MD)
(108 Points)
Replied 09 August 2010
Hi Parthas
Currency options are no different from regular Stock Option / Index Option. Only difference, the underlying is a Currency rather than index / stock / commodity.
Accounting should be as follows -
1. Premium paid should be shown as an Asset till expiry / exercise.
2. Upon expiry / exercise, it should be transferred to Profit and Loss Account.
3. As at Balance Sheet date, Options not yet settled should be disclosed on the Balancce Sheet side, after duly creating a provision for any loss based on Balance Sheet date values of Premium for the same Option Contract.
Rineesh R
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