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A forward exchange contract is not typically considered a liability on its own; rather, it is a financial instrument used to hedge against currency risk. However, it may result in a liability if the contract has a negative fair value at the reporting date, meaning the company would incur a loss if it settled the contract at that moment. In such cases, the negative fair value is recognized as a liability on the balance sheet. Overall, whether it is classified as a liability depends on the specific circumstances and the valuation of the contract.
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What is equity roll-forward?
An equity roll forward allows an investor to maintain the investment position of a contract beyond its initial expiration. This occurs shortly after the initial contract ends.
What are the four main types of transactions from which transaction exposure arises?
1) Purchasing or selling on credit goods or services when prices are stated in foreign currencies, 2) Borrowing or lending funds when repayment is to be made in a foreign currency, 3) Being a party to an unperformed foreign exchange forward contract, and 4) Otherwise acquiring assets or incurring liabilities denominated in foreign currencies.
Why corporations prefer to carry forward current year losses?
Corporations often prefer to carry forward current year losses to offset future taxable income, which can reduce their tax liability in subsequent years. This strategy allows them to effectively manage cash flow and retain more capital for reinvestment or operational needs. Additionally, carrying forward losses can provide long-term tax relief, making it a financially advantageous decision when anticipating future profitability.
What account's balance is carried forward to the next accounting period?
The account balance that is carried forward to the next accounting period is typically the ending balance of permanent accounts, also known as real accounts. These include asset, liability, and equity accounts, which retain their balances over multiple accounting periods. In contrast, temporary accounts, such as revenues and expenses, are closed at the end of each period, and their balances do not carry forward. Thus, only the balances of permanent accounts are reflected in the new accounting period.
Loss Carry forward on a tax return?
If you are talking about a capital loss carry forward, you would enter the amount on Schedule D.
What is forward rate in foreign exchange market?
Transaction in future date by forward contract(future delivery) to purchase/sell foreign exchange at prevailing rate.
Is the forward contract is legal in India?
if is done in national stock exchange it is legal
What strategy the Indian importer needs to follow to hedge the exchange risk?
it is better to go for forward contract
What rolling forward contract is known?
A rolling forward contract is a financial agreement that allows parties to extend the maturity of a forward contract by simultaneously closing out the existing contract and entering into a new one with a later expiration date. This type of contract is commonly used in foreign exchange and commodities markets to manage risk and maintain exposure over time. By rolling forward, participants can adapt to changing market conditions while avoiding the need to settle the contract.
What type of derivative instrument is a forward-based contract in which two parties agree to exchange streams of payments for a specified period of time?
A forward-based contract in which two parties agree to exchange streams of payments for a specified period of time is known as a "swap." Swaps are derivative instruments that typically involve the exchange of cash flows, which can be based on interest rates, currencies, or commodities. These agreements allow parties to hedge risk or speculate on changes in market conditions over the contract's duration.
Advantages of operating in forward market?
Forward market allows the dealers to concentrate on their core line of business because they don't bother themselves with the risk of currency exchange. There is no premium paid upfront on forward contract as compared to futures and options.
What is forward rate?
Forward exchange rate is the agreed upon exchange rate to be used in a forward trade.
How do you use forward exchange in a sentence?
The track star used forward exchange in the relay.
What is the basic difference between a forward and future market?
A forward contract is a private and customizable contract that needs to be settled at the end of the agreement and is traded over the counter. A futures contract has standardized terms and is traded on an stock or commodity exchange, where prices are settled on a daily basis until the end of the contract.
Difference between Spot Exchange Rate and Exchange rate?
An exchange rate, which is also called the foreign-foreign exchange rate, is the rate that currency will be exchanged for another currency and may have a forward contract. The spot exchange rate is the current exchange rate today with immediate delivery and it is also called benchmark rates and outright rates.
How a forward premium or discount is computed?
forward exchange rate can be computed from spot exchange by adding or subtracting premium ir discount. also forward rate can be at forward premiun of discount when comapred to spot exchange rate.
When you choose future contract over forward contract?
When there isn't an active market for the forward contract. Generally, Futures contracts have a much more active open market than forward contracts and have alot more choice in terms of expiration months than forward contracts.
