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Future Contract Asset (Fair Value Hedge)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Future Contract Asset (Fair Value Hedge)

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by Stephen Widberg.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • February 25, 2021 at 2:23 pm #611674
    wongyongshengwong
    Participant
    • Topics: 1
    • Replies: 0
    • ☆

    Referring to BPP SBR Study Text Chapter 8 Illustration 11, on the topic of fair value hedging

    1 July 20X6
    Joules sold 10,000 ounces in the futures market for $215 per ounce for delivery on 30 June 20X7.

    31 December 20X6
    The futures price for 30 June 20X7 delivery was $198 per ounce.

    30 June 20X7
    The trader sold the inventories and closed out the futures position at the then spot price of $190 per ounce.

    May I know that why it is increase in future contract asset (a gain) although the price of future keeps dropping?

    February 28, 2021 at 8:17 am #612060
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    You have agreed to sell for 215.

    The selling price (for everyone else drops to 190).

    So you are happy – it’s a gain.

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