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Former Member
Dec 19, 2009 at 11:40 AM

Forward Contract

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Hi,

Please find the following example of forward contract and advise whether the funcationalities explained is possible in Treasury Module.

Eg:

Company has taken a loan of 1,00,000 USD on 01.01.2009 ,which has to be repaid on 30.06.2009.Against which it has entered into a forward contract to mitigate the risks

Exchange Rates INR/USD is as below:-

Period 01.01.09 31.03.09 30.06.09

Spot Rate 45 47 52

Forward Rate(for 6 Months) 48 - -

Forward Rate(for 3 Months) - 51 -

The entries for the forward deal would be as follows:-

On 01.01.2009:-

1)Entry passed for entering the forward exchange contract:

Foreign Currency receivable A/c Dr 45 Lakhs

Deffered Premium A/c Dr 3 Lakhs

To Amount payable to Bank 48 Lakhs

On 31.03.2009:-

2)Entry passed for amortisation of proportionate premium on forward contract for 3 months

Premium A/c Dr 1.5 Lakhs

To Deferred Premium 1.5 Lakhs

3)Entry passed for booking exchange gain (47-45)

Foreign Currency receivable A/c Dr 2 Lakhs

To Foreign Exchange gain 2 Lakhs

On 30.06.2009

4) Entry passed for amortisation of proportionate premium on forward contract for 3 months

Premium A/c Dr 1.5 Lakhs

To Deferred Premium 1.5 Lakhs

5) Entry passed for booking exchange gain (52-47)

Foreign Currency receivable A/c Dr 5 Lakhs

To Foreign Exchange gain 5 Lakhs

6) Entry passed for amount paid to bank for settlement of forward contract

Amount payable A/c Dr 48 Lakhs

To Bank 48 Lakhs

7) Entry passed for valuing amount of forign currency @ spot rate

Foreign Currency Received A/c Dr 52 Lakhs

To Foreign currency receivable 52 Lakhs

Thanks & Regards

Ramesh Nair