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On November 1, Year One, the Haynie Company signs a contract to receive one million Japanese yen on February 1, Year Two, for $10,000 based on the three-month forward exchange rate at that time of $1 for 100 Japanese yen (1,000,000 x 1/100 or $10,000). This contract is a derivative because its value is derived from the future value of the Japanese yen in relation to the US dollar. On December 31, Year One, the Haynie Company is producing financial statements. How is this forward exchange contract reported?

a) It is shown as an asset or a liability at its fair value.

b) It is shown only as an asset at its fair value.

c) It is shown only as a liability at its fair value.

d) It is only disclosed in the notes to the financial statements because it is a future transaction.

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  • Reference No.:- M947713

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