Q3 A (ii) – March June 2019 – SBR Past Paper

Hello,

In Q3 A (ii) – March June 2019 , i would have interpreted the forward contract to purchase a fixed quantity of electricity at 31.12.X8 for 20 million euros, as a cash flow hedge.

However, per the ACCA solution, they say and i quote “However, the derivative should have been valued at FVTPL and not fair value through other comprehensive income”….to me, this implies that forward contract is being treated as a fair value hedge…..Or, are there special rules around a foreign currency derivative?

Any clarification you could provide as the reasons for the suggested accounting treatment of the forward contract would be appreciated.

Thanks