Currency Forward

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Currency Forward

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 contract, determining the forward price is a zero-sum game: one party will gain on the contract and one will lose. Thus, in a currency forward, each party believes that the prevailing exchange rate will move in a direction favorable to him/her by the expiry of the contract.
References in periodicals archive ?
Accounting Standards Update 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, modifies the accounting and reporting of foreign currency forward contract hedges of recognized assets and liabilities denominated in a foreign currency.
* Foreign Currency Forward Contract: On September 18, 2018, the Company entered into a foreign currency forward contract in the amount of [euro]1.625 billion related to the anticipated cash portion of the purchase price of EHG.
The Service has ruled that a currency forward contract in which the amount ultimately received would be determined by both intervening currency fluctuations and market interests rates was in fact a debt instrument for tax purposes.
-- The fair value of a foreign currency forward contract will be affected by changes in the exchange rate, and the fair value of a put option for an available-for-sale security will be affected by changes in the fair value of the underlying security.
For example, assume a taxpayer undertakes to purchase a piece of equipment to be used in its trade or business and simultaneously enters into a foreign currency forward contract (because the contract price was denominated in a foreign currency) to "fix" the price of the equipment in U.S.
This exposure can be mitigated through a foreign currency forward contract.
For certain foreign currency derivatives, such as a foreign currency forward contract, Sec.
However, for guidance on determining the fair value of a foreign currency forward contract, CPAs should look to Statement no.
The proper treatment of foreign currency forward contract hedges of assets and liabilities denominated in a foreign currency is not easily discernible from the examples provided in the relevant statements (SFAS 52, Foreign Currency Translation; SFAS 133, Accounting for Derivative Instruments and Hedging Activities; SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities--an amendment of SFAS 133; and SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities) or from the implementation guides from the FASB Derivatives Implementation Group (DIG).
stamp duty recorded in general and administrative expenses; $145 million gain in other non-operating (expense) income related to euro-denominated bank balances associated with the upfront cash consideration for the acquisition of Visa Europe; and $42 million loss in other non-operating (expense) income related to currency forward contracts entered into to mitigate a portion of the foreign currency exchange rate risk associated with the upfront cash consideration for the acquisition of Visa Europe.
All of Deutsche Bank's currency-hedged ETFs are fully hedged with currency forward contracts, as is the WisdomTree fund.
By investing in their related unhedged, parent iShares ETFs (EFA, EWG and EWJ) and implementing foreign currency forward contracts, iShares Currency Hedged ETFs provide an easy and cost-effective way to mitigate unwanted currency risk.