financial instrument and derivative

Question 1

derivative characteristic, 3

Answer 1

• no net investment
• an underlying and a notional amount
• net settlement

Question 2

option contract

Answer 2

right , not obligation to purchase/sell in the future
put-sell
call-buy

Question 3

future contract

Answer 3

right and obligation to deliver/purchase foreign currency/goods in the future price set today

Question 4

spot rate

Answer 4

the exchange rate that is effective on a particular date

Question 5

remeasured

Answer 5

when transaction occur some country other than the functional currency(transaction & functional currency)

Question 6

translated

Answer 6

functional currency is not the same as the currency for reporting(functional & reporting)

Question 7

derivative

Answer 7

• may be assets or. liabilities
• report at fair value
• unrealize gains/losses cash flow in OCI, fair value hedge in I/S

Question 8

difference between fair value and cash flow hedge

Answer 8

• fair value derivative against a recognized asset/liability on the balance sheet or a firm purchase commitment
• cash flow hedging against a forecast transaction that is expect to take place in the future,not yet committed