Master TDS & TCS Provisions with Critical Issues. Register Now!

forward contracts

Ankur bansal (a) (135 Points)

26 December 2010

Pls tell treatment of profit and loss on reinstatement(year end) of forward contracts(open forward contracts) .

Reply
Follow
Share

3 Replies

Ankur bansal (a) (135 Points)
Replied 28 December 2010

pls reply

Upgrade to CAclubindia Pro. Subscribe Now!

Rineesh Raghavan (MD) (108 Points)
Replied 28 December 2010

Hi Ankur

Please tell us if it is a Speculative Forward Contract or Non Speculative Forward Contract? Speculative Forward Contract should be carried (either as an Asset / Liability) based on the Forward Rate existing on the reporting date for the corresponding expiry date. (Corresponding Debit / Credit will go to Profit and Loss Account)

Note: This accounting treatment is now covered by AS 30 for all types of Forward Contracts, including Foreign CUrrency Forwards / Futures.

Non Speculative Forward Contracts are to be restated based Closing Spot Rate.

Regards

Rineesh R

Ankur bansal (a) (135 Points)
Replied 29 December 2010

i dont know hw to differentiate between two,

wel i have eg.

Co export its goods on 1st january for 1000$ which is to be received on 30th march, spot rate is 40rs. Now company enters into forward contract for 30 march at rs42, now if i am not wrng co wil book rs 2*1000$ as premium and provide in p/l, now if spot rate on 30 march is rs 44/41/39 then what is the treatment????