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I am stuck with what to do with the following and would be grateful if someone could help
Walker (who is a subsidiary of another company) entered into a futures contract during the year to hedge a forecast sale in the year ended 31 October 20×9. The futures contract was designated and documented as a cash flow hedge. At 31 October 20×8, had the forecast sale occurred, Walker would have suffered a loss of $1.9m and the futures contract was standing at a gain of $2m. No accounting entries have been made to record the futures contract.
The question requirements are to prepare a consolidated statement of financial position as at 31 October 20×8. Please could anyone tell me how to treat this adjustment?
Thank you
Hi Mike, are you able to help with this query? I am still stuck a week after posting the question, thanks
This is one of the workings from the BPP Course Exam 2?
I took the approach that as it was a cash flow hedge that any gain/loss would be recognised in OCI, I think I took the net gain of $0.1m to the retained earnings working of the subsidiary – not sure if this is right though.
Hi
I asked my tutor about this at college and because it’s a cash flow hedge, the £2m is recognised as a financial asset, the £1.9m is put into reserves within OCI until the cash flow happens and the £0.1m is taken to the P/L account (via retained earnings)
Hi
I’ve spent time trying to find the question – now not only do I discover that it’s a BPP mock exam answer but also that you’ve found the answer from your tutor at college.
Can I presume that you’re question is now answered?
Yes my question was in relation to one adjustment that was contained within my BPP course exam, are posts of that nature prohibited? I’m sorry if you feel I have wasted your time, I was not aware that my post was being looked at by you as no response had been received. I made the post when I was unable to speak to my college tutor but as it had not been answered I asked for help next time I attended college
Hi Miss J
No problem at all. The only issue I had was that I didn’t recognise the question so couldn’t read the context in which the futures contract was located.
But you’re welcome to post on the site anything you want (within reason!). I can’t speak for the other tutors on this site but I don’t have a full set of BPP, Kaplan, Emile Woolf, LSBF, ATC, nor any other provider’s material so references are always appreciated and will give me a chance of finding the source document.
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