II. La autenticidad en Heidegger
1) El concepto de autenticidad
to record the settlement of the forward contract.
Accumulated OCI …… 27,964 (19,838 – 12,000 + 20,126)
Gain on forward contract 27,964 to reclassify the remaining amount of accumulated OCI.
63. A (See entries above)
64. D (520,000 debit – 496,000 credit) = 24,000 net cash receipt
Exercises 1. Solutions:
The entries on December 15, 20x1 are as follows:
Hedged item – Receivable Hedging instrument - Forward contract (Derivative)
No entry is made for the forward contract because its value is zero.
172
The entries on December 31, 20x1 are as follows:
Hedged item – Receivable Hedging instrument - Forward contract (Derivative) Dec. 31, 20x1
Accounts receivable……20K [ (0.49 - 0.48) x 2M]
FOREX gain………....20K to adjust accounts receivable for the increase in spot exchange rate
Dec. 31, 20x1
Loss on forward contract….30K Forward contract (liability)...30K [ (0.485 - 0.47) x 2M]
to record the value of the derivative, computed as the difference between the agreed selling price of P0.47 and the current forward rate of P0.485 multiplied by 2M yens.
) Alternatively, the change in the fair value of the forward contract may be analyzed as follows:
Fair value, Dec. 31
[(.485 current forward rate - .47 initial forward rate) x 2M] (30,000) liability Less: Fair value, Dec. 15 0 Loss on change in fair value (30,000) Gross settlement
The entries on January 15, 20x2 are as follows:
Hedged item – Receivable Hedging instrument - Forward contract (Derivative) Jan. 15, 20x2
Cash – foreign currency…920K (2M x 0.46 current spot rate) FOREX loss………...60K Accounts receivable……….980K (960K + 20K)
to recognize the FOREX loss on the change in currency rates during the period and to record the receipt of 2M yens from the customer
Jan. 15, 20x2
Cash – local currency……940K (2M x 0.47 agreed rate)
Forward contract (liability)..30K Cash – foreign currency…920K Gain on forward contract ....50K to recognize the change in forward rates during the period and to record the settlement of the forward contract through the remittance of the 2M yens received from the customer to the bank in exchange for the agreed price of P940,000.
Fair value, Jan. 15
[(.46 current forward rate - .47 initial forward rate) x 2M] 20,000 asset Less: Fair value, Dec. 31
[(.485 current forward rate - .47 initial forward rate) x 2M] (30,000) liability Gain on change in fair value 50,000
173 Net settlement
Hedged item – Receivable Hedging instrument - Forward contract (Derivative) Jan. 15, 20x2
Cash – foreign currency…920K (2M x 0.46 current spot rate) FOREX loss………...60K Accounts receivable……….980K (960K + 20K)
to record the receipt of 2M yens from customer
Jan. 15, 20x2
Cash – local currency…… 20K [(0.47 – 0.46) x 2M]
Forward contract (liability)..30K Gain on forward contract ....50K to record the net cash settlement of the forward contract computed as the difference between the agreed forward rate of P0.47 and the current forward rate of 0.46 multiplied by the notional amount of 2M yens.
2. Solution:
The entry on December 15, 20x1 is as follows:
Hedged item – None Forward contract (Derivative) Dec. 15, 20x1
No entry
No entry is made for the forward contract because its value is zero.
The entry on December 31, 20x1 is as follows:
Hedged item – None Forward contract (Derivative) Dec. 31, 20x1
Loss on forward contract…..30K Forward contract (liability)....30K [ (0.485 - 0.47) x 2M]
to record the value of the derivative computed as the difference between the agreed selling price of P0.47 and the current forward rate of P0.485 multiplied by 2M yens.
Gross settlement
Hedged item – None Forward contract (Derivative) Jan. 15, 20x2
Cash – local currency…...940K (2M x 0.47 agreed rate)
Forward contract (liability).30K Cash – foreign currency…920K Gain on forward contract…..50K to record the settlement of the forward contract through the remittance of the 2M yens to the bank in exchange for the agreed price of P940,000.
174 Net settlement
Hedged item – None Forward contract (Derivative) Jan. 15, 20x2
Cash – local currency…… 20K [(0.47 – 0.46) x 2M]
Forward contract (liability)..30K Gain on forward contract ....50K to record the net cash settlement of the forward contract computed as the difference between the agreed forward rate of P0.47 and the current forward rate of 0.46 multiplied by the notional amount of 2M yens.
3. Solution:
The entries on December 1, 20x1 are as follows:
Hedged item – Payable Hedging instrument – Forward contract (Derivative)
The entries on December 31, 20x1 are as follows:
Hedged item – Payable Hedging instrument – Forward contract (Derivative)
Forward contract (asset).. .6K Gain on forward contract.. .6K [(1.27 forward rate – 1.24 forward rate) x 20K]
The entries on January 15, 20x2 are as follows:
Hedged item – Payable Hedging instrument – Forward contract (Derivative)
Cash - foreign currency.. .26K (20K x 1.30)
Cash- local currency…….24.8K Forward contract (asset)… .6K Gain on forward contract.... .6K
[(1.30 – 1.27) x 20K]
175
Hedged item – Receivable Hedging instrument - Forward contract (Derivative)
The entries are as follows:
Hedged item – None Forward contract (Derivative) Dec. 15, 20x1
No entry Dec. 31, 20x1
Forward contract (asset).. .6K Gain on forward contract.. .6K [(1.27 forward rate – 1.24 forward rate) x 20K]
Gross settlement
Jan. 15, 20x2
Cash - foreign currency.. .26K (20K x 1.30)
Hedged item – None Forward contract (Derivative)
Jan. 15, 20x2 Jan. 15, 20x2
The entries are as follows:
176 Hedged item – Firm sale
commitment Hedging instrument - Forward contract (Derivative) to recognize the change in the fair value of the firm commitment
Dec. 31, 20x1
Loss on forward contract..30K Forward contract (liability)..30K [(0.485 – 0.47) x 2M yens
to recognize the change in the fair value of the forward contract
Gross settlement
Hedged item – Firm commitment
Hedging instrument - Forward contract (Derivative) Jan. 15, 20x2
Cash (foreign currency)… 920K (2M yens x 0.46 spot rate)
Loss on firm commitment...50K Sales………..940K (2M yens x 0.47 forward rate) Firm commitment (asset)..30K
to record the actual sale transaction, to recognize the change in the fair value of the firm commitment, and to derecognize the firm commitment to recognize the change in forward rates during the period and to record the settlement of the forward contract through the remittance of the 2M yens received from the customer to the bank in exchange for the agreed price of P940,000.
Net settlement
Hedged item – Receivable Hedging instrument - Forward contract (Derivative) Jan. 15, 20x2
Cash (foreign currency)..920K (2M yens x 0.46 spot rate) Loss on firm commitment...50K Sales………..940K (2M yens x 0.47 forward rate) Firm commitment (asset)..30K
to record the actual sale transaction, recognize the change in the fair value of the firm commitment, and to derecognize the firm commitment
Jan. 15, 20x2
Cash (local currency)…... 20K Forward contract (liability)…30K Gain on forward
contract………...50K
to recognize the change in forward rates during the period and to record the net cash settlement of the forward contract.
6. Solution:
The entries are as follows:
Hedged item – Firm purchase Hedging instrument - Forward
177
commitment contract (Derivative)
Dec. 15, 20x1 to recognize the change in the fair value of the firm commitment
Dec. 31, 20x1
Forward contract (asset)… .6K [(1.27 – 1.24) x 20K yens
Gain on forward contract… .6K to recognize the change in the fair value of the forward contract
Gross settlement
Hedged item – Firm
commitment Hedging instrument - Forward contract (Derivative) Jan. 15, 20x2
Inventory………..24.8K (20K wons x 1.24 forward rate) Loss on firm commitment... .6K Firm commitment (liability).. .6K Cash (foreign currency)……26K (20K wons x 1.30 spot rate)
to record the actual purchase transaction, to recognize the change in the fair value of the firm commitment, and to
derecognize the firm commitment
to recognize the change in forward rates during the period and to record the settlement of the forward contract through the purchase of 20,000 wons from the bank for the agreed purchase price of P24,800.
Net settlement
Hedged item – Receivable Hedging instrument - Forward contract (Derivative) Jan. 15, 20x2
Inventory………..24.8K Loss on firm commitment... .6K Firm commitment (liability).. .6K Cash (foreign currency)……26K
to record the actual purchase transaction, recognize the change in the fair value of the firm commitment, and to derecognize the firm commitment
to recognize the change in forward rates during the period and to record the net cash settlement of the forward contract.
7. Solution:
The entries are as follows:
Hedged item – Firm purchase
commitment Hedging instrument - Forward contract (Derivative) Oct. 1, 20x1
No entry
Oct. 1, 20x1 No entry
178 Dec. 31, 20x1
Loss on firm commitment ..13,864 Firm commitment (liability).13,864 to recognize the change in the fair value of the firm commitment
Dec. 31, 20x1
Forward contract (asset)...13,864 Gain on forward contract..13,864 to recognize the change in the fair value of the forward contract
Mar. 31, 20x2
Inventory (147 x 2,000).294,000 Loss on firm commitment (26,000 – 13,864)……… 12,136
to record the actual purchase transaction, to recognize the change in the fair value of the firm commitment, and to
derecognize the firm commitment
to recognize the change in forward rates during the period and to record the net cash settlement of the forward contract.
8. Solution:
The entries are as follows:
Hedged item – Firm purchase
commitment Hedging instrument - Forward contract (Derivative)
Loss on firm commitment . 19,804 Firm commitment (liability).19,804 to recognize the change in the fair value of the firm commitment
Dec. 31, 20x1
Forward contract (asset)…19,804 Gain on forward contract..19,804 to recognize the change in the fair value of the forward contract
Mar. 31, 20x2
Inventory (50 x 2,000)..100,000 Firm commitment
to record the actual purchase transaction, to recognize the change in the fair value of the firm commitment, and to
derecognize the firm commitment
Mar. 31, 20x2
Loss on forward contract..39,804 [(negative 20,000) minus 19,804]
Forward contract (asset)…19,804 Cash………. 20,000 [(50 – 40) x 2,000]
to recognize the change in forward rates during the period and to record the net cash settlement of the forward contract.
179 9. Solution:
The entries are as follows:
Hedged item – Highly probable
forecast transaction Hedging instrument - Forward contract (Derivative)
No entry (see previous explanation) Dec. 31, 20x1
Forward contract (asset)… 20K [(55 –45) x 2,000
Accumulated OCI….……. 20K to recognize the change in the fair value of the forward contract
Jan. 15, 20x2
Inventory………..120K (2,000 x 60 current spot rate)
Cash (foreign currency)….120K
to record the actual purchase transaction
Jan. 15, 20x2
Forward contract (asset)… 10K [(60 –55) x 2,000
Accumulated OCI… ……. 10K to recognize the change in the fair value of the forward contract
Jan. 15, 20x2
Cash [(60 – 45) x 2,000]…. 30K Forward contract (asset)…30K to record the net settlement of the forward contract.
10. Solution:
The entries are as follows:
Hedged item – Highly probable
forecast transaction Hedging instrument - Forward contract (Derivative) Oct. 1, 20x1
No entry
Oct. 1, 20x1 No entry
The fair values of the forward contract and gains/losses on changes in the fair values of the forward contract are determined as follows:
Date
180 209,154
4/1/x2 (29.7M ÷ 144) =
206,250 (5,892) 1 (5,892) (2,950)
Hedged item – Highly probable forecast transaction
Hedging instrument - Forward contract (Derivative) Dec. 31, 20x1
No entry
Dec. 31, 20x1
Forward contract (asset).. 2,944 Accumulated OCI… ……. 2,944 to recognize the change in the fair value of the forward contract
April 1, 20x2
Accounts receivable..206,250 Sales………206,250 (29.7M ÷ 144 spot rate) to record the actual sale transaction
April 1, 20x2
Forward contract (asset)..2,950 Accumulated OCI… ……. 2,950 to recognize the change in the fair value of the forward contract
April 1, 20x2
Accumulated OCI……. 5,894 (2,944 + 2,950)
Sales……….5,894 to reclassify the amount relating to the hedged item that affected earnings from OCI to profit or loss.
April 1, 20x2
Cash (2,944 + 2,950)……. 5,894 Forward contract (asset)…5,894 to record the net settlement of the forward contract.
11. Solution:
The amortization table is prepared as follows:
Interest expense Present value
a = b x 1.6530% b = prev. bal. + a
Dec. 1, 20x1 240,000
Dec. 31, 20x1 3,968 243,968
Jan. 31, 20x2 4,032 248,000
Total interest expense 8,000
*100,000 notional amount x 2.40 spot rate
The following table shows the computations for the fair values of the forward contract:
181
Jan. 31, 20x2: (1.30 - 1.24) x 200,000 x 1 12,000 6,030 The entries on December 1, 20x1 are as follows:
Hedged item – Payable Hedging instrument – Forward contract (Derivative) Dec. 1, 20x1
Inventory………240K
(200K wons x 1.20 spot rate)
Accounts payable……240K to record the purchase of inventory.
Dec. 1, 20x1 to recognize foreign exchange loss due to increase in exchange rate.
Dec. 31, 20x1
Interest expense……….. 3,968 Forward contract (asset)...5,970 Accumulated OCI ……… 9,938 to recognize change in fair value of derivative and record effective portion in other comprehensive income, taking into account interest expense implicit in the forward contract.
Dec. 31, 20x1
Accumulated OCI …….6,000 Gain on forward contract….6,000 to reclassify an amount out of other comprehensive income to offset the transaction loss on the account payable.
Jan. 31, 20x2
FOREX loss………… 14,000
[200K x (1.30 – 1.27)]
Accounts payable….14,000 to recognize foreign exchange loss due to increase in exchange rate.
Jan. 31, 20x2
Interest expense……….. 4,032 Forward contract (asset)...6,030 Accumulated OCI ………10,062 to recognize change in fair value of derivative and record effective portion in other comprehensive income, taking into account interest expense implicit in the forward contract.
Accounts payable…260,000
Cash - foreign currency…260,000
to record the settlement of the account payable
Cash – foreign currency..260K Cash – local currency…… 248K Forward contract……… 12K (5,970 + 6,030)
to record the settlement of the forward contract.
Accumulated OCI …… 14,000 (9,938 – 6,000 + 10,062)
Gain on forward contract...14,000 to reclassify the remaining amount of accumulated OCI.
182
Variation: Net settlement and Compound entries
Hedged item – Payable Hedging instrument – Forward contract (Derivative) Jan. 31, 20x2
Accounts payable…. 246,000 (240K + 6K)
FOREX loss………… 14,000
[200K x (1.30 – 1.27)]
Cash……….. 260,000
Jan. 31, 20x2
Interest expense……….. 4,032 Forward contract (asset)...6,030 Accumulated OCI ………10,062
Cash………. 12K Accumulated OCI ………...14K (9,938 – 6,000 + 10,062)
Forward contract……… 12K (5,970 + 6,030)
Gain on forward contract………14K to record the net settlement of the forward contract and to reclassify the remaining amount of accumulated OCI.
183