A Company Located in Canada Spends $2,000 to Purchase a Foreign

question 66

Essay

A company located in Canada spends $2,000 to purchase a foreign currency futures contract to buy US$100,000 at C$1.05:US$1.00.The contract matures 110 days later.Under which of the following circumstances could the company consider this future contract to be a fair value hedge for accounting purposes?

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Definitions:

Vagus

A cranial nerve that interfaces with the parasympathetic control of the heart, lungs, and digestive tract.

Taste

A sense that detects flavors in substances, primarily recognized via taste buds on the tongue.

Chemical Stimulus

A type of stimulus involving chemicals that can initiate a biological response in an organism or cell.

Olfactory

Relating to the sense of smell or the organs of smell.