Currency forward contracts and settelment in variosu currencies
How do I enter a currency forward contract like an EUR/AUD forward contract or an EUR/USD forward contract for 6 months as an example
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RichardTorian
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11/18/09 8:03pm PST
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Hi Haim9747,
The amount owed in six months is a liability, but the debit (the current value of that liability using the current exchange rate) might be different than the liability amount. So, the difference in the two numbers is, I believe, considered interest expense or income.
If you have to generate financial statements within the six months, more entries are needed to show the effects of exchange rate changes. Then, at the contract end date, a payment entry is needed.
The above is about the extent of what I do know, and I am certain it is incomplete.
Richard
