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Foreign Currency Forward Contract

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Foreign currency forward contract
Agreement that obligates its parties to exchange given quantities ofcurrencies at a prespecified exchange rate on a certain future date.

Foreign Currency Forward Contract
An agreement between two parties to exchange a certain amount in currencies at a certain rate at a certain time. When a forward contract of any sort is made, terms are negotiated directly between the parties, unlike a futures contract, which trades on an exchange. Partly because there is little secondary market for forward contracts, determining the forward price is a zero-sum game: one party will gain on the contract and one will lose. Thus, in a foreign currency forward contract, each party believes that the prevailing exchange rate will move in a direction favorable to him/her by the expiry of the contract.


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However, for guidance on determining the fair value of a foreign currency forward contract, CPAs should look to Statement no.
9 million due largely to a fair value adjustment in respect of a foreign currency forward contract which is not accounted for as a hedge.
7 million due largely to a fair value adjustment in respect of a foreign currency forward contract which is not accounted for as a hedge.
 
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