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Urgent: put option query !

Rohit ([ ] ) (1140 Points)

24 August 2011

I have an urgent query regarding accounting for Put Options. I want to understand how the seller of put options account for a put option.

For example party A sold a put option to party B with exercise price of 100 INR when the Market price is 120 INR. How is this accounted for and carried over the life of put which is two years. I am looking at it in the books of party A i.e the seller of the put.

Any reply or any guidance on where I can find the answer is very helpful.

Many thanks in advance for your answers.

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1 Replies

murtuza munim (AVP) (141 Points)
Replied 24 August 2011

Hi Rohit,

As regards your query, please note that the Institute of Chartered Accountants of India has come out with a Guidance Note on accounting for equity index and equity stock futures and options. The Guidance note is attached herewith. You can refer the same since it contains the proper explanation, the required accounting entries along with the journal entries thereof both in the books of buyer and seller in all possible outcomes of the derivative contract.

Though would request you to check on the status of the Guidance Note. vis-a-vis the implementation of AS 30, Financial Instruments: Recognition and Measurement

Hope have been able to help you on the same.

Thanks,

Murtuza Munim

98336 55123

Attached File : 106137 811983 guidance note on accounting for futures and otpions.pdf downloaded: 219 times