11-12-2007, 09:12 PM
Dear,
Can you identify and explain the embedded financial instrument and derivative in the above situation narrated by you?
If contracts are denominated in US Dollars, then whether US Dollars are used just as a measure of the transaction by setlling down in local currency determined through applicable exchange rates or even the transaction is settled by actual delivery of US dollars instead of local currency?
Does such company book a forward rate contract for the underlying transactions (if actual delivery of US dollars is made) or just incorporate the transactions on spot rate and any resulting coversion exchange gain or loss on actual settlement date is carried to profit or loss account?
Regards,
Kamran.