• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exam Results

Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2025 exams.
Get your discount code >>

Fair value hedge – firms commitment

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Fair value hedge – firms commitment

  • This topic has 7 replies, 2 voices, and was last updated 6 years ago by P2-D2.
Viewing 8 posts - 1 through 8 (of 8 total)
  • Author
    Posts
  • December 22, 2018 at 2:19 pm #492503
    aarina
    Member
    • Topics: 71
    • Replies: 145
    • ☆☆☆

    Hi Chris,

    Im referring to Kaplan SBR textbook page 296 the answer to Q18.

    The question says that :
    – the derivative instrument has risen from $0 in 1/10/x1 to $95K in 31/12/x1
    – hedging item, firms commitment has fallen, cost $1m at 1/10/x1 to $1.1m at 31/12/x1

    I wanted to know why would they address it as “fallen” when the purchase cost has increased?
    Why would the firm commitment a fallen? i literally dont get this.

    Thanks

    December 22, 2018 at 3:06 pm #492507
    aarina
    Member
    • Topics: 71
    • Replies: 145
    • ☆☆☆

    The Q is on page 273.

    wanted to know since the risk is on fx rate fluctuations and they are going to buy and so they are afraid of fx rate decrease right (purchase get more expensive, foreign currency devalue)?

    does the purchase of the asset at that cost CU2m at 1/10 will still be CU2m at 31/12?
    because if i did that than fx rate at end and start will differ

    fx 1/10: CU2/$1 (given in Q)
    fx 31/12: CU1.818/$1 ( my otherwise flawed assumption that fx decrease)

    Please explain why they have given the spot rate?

    December 22, 2018 at 5:38 pm #492517
    aarina
    Member
    • Topics: 71
    • Replies: 145
    • ☆☆☆

    what does it mean when it says “recycling of losses held within equity” – against the carrying amount of the plant?

    December 24, 2018 at 10:02 pm #492648
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7172
    • ☆☆☆☆☆

    @aarina said:
    Hi Chris,

    Im referring to Kaplan SBR textbook page 296 the answer to Q18.

    The question says that :
    – the derivative instrument has risen from $0 in 1/10/x1 to $95K in 31/12/x1
    – hedging item, firms commitment has fallen, cost $1m at 1/10/x1 to $1.1m at 31/12/x1

    I wanted to know why would they address it as “fallen” when the purchase cost has increased?
    Why would the firm commitment a fallen? i literally dont get this.

    Thanks

    Hi,

    I’m not too sure as to why they’ve said this. If they are purchasing the goods then the cost has risen. It all seems a bit odd.

    Thanks

    December 24, 2018 at 10:04 pm #492649
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7172
    • ☆☆☆☆☆

    @aarina said:
    The Q is on page 273.

    wanted to know since the risk is on fx rate fluctuations and they are going to buy and so they are afraid of fx rate decrease right (purchase get more expensive, foreign currency devalue)?

    does the purchase of the asset at that cost CU2m at 1/10 will still be CU2m at 31/12?
    because if i did that than fx rate at end and start will differ

    fx 1/10: CU2/$1 (given in Q)
    fx 31/12: CU1.818/$1 ( my otherwise flawed assumption that fx decrease)

    Please explain why they have given the spot rate?

    Hi,

    We are given the spot rate so that we can work out the purchase price at the date the contract was entered into and then compare it to the price at the reporting date. The price in CU stays the same but we need to convert back to $ to look at the movement in price.

    Thanks

    December 24, 2018 at 10:05 pm #492650
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7172
    • ☆☆☆☆☆

    @aarina said:
    what does it mean when it says “recycling of losses held within equity” – against the carrying amount of the plant?

    Hi,

    The losses are take out of where they are currently held and taken to the value of the asset and not to retained earnings or profit or loss.

    Thanks

    December 25, 2018 at 8:08 am #492661
    aarina
    Member
    • Topics: 71
    • Replies: 145
    • ☆☆☆

    Thank you and merry xmas!!

    December 26, 2018 at 10:05 pm #495778
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7172
    • ☆☆☆☆☆

    Merry Xmas to you too!

  • Author
    Posts
Viewing 8 posts - 1 through 8 (of 8 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • AdityaSairam on Overcapitalisation and Overtrading – ACCA Financial Management (FM)
  • verweijlisa on Financial performance – Example 2 – ACCA Financial Reporting (FR)
  • John Moffat on Linear Programming – Spare capacity and Shadow prices – ACCA Performance Management (PM)
  • John Moffat on The Statement of Financial Position and Income Statement (part d)
  • Salexy on Linear Programming – Spare capacity and Shadow prices – ACCA Performance Management (PM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in