The Discount or Premium on a Forward Contract Entered into as a Hedge

question 6

Multiple Choice

The discount or premium on a forward contract entered into as a hedge of an exposed asset or liability position should be:

• A) included as a separate component of stockholders' equity.
• B) amortized over the life of the forward contract.
• C) deferred and included in the measurement of related foreign currency transaction.
• D) none of these.

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Definitions:

Nominal Interest

is the stated interest rate of a loan or financial product, not adjusted for inflation, representing the face value of the interest charged or earned.

Capital Good

Long-lasting goods that businesses use to produce goods and services, contributing to their productive capacity.

Rate Of Interest

The percentage charged on the total amount of borrowed money or paid on invested capital.

Cardiovascular Disease

A group of conditions affecting the heart or blood vessels, encompassing coronary artery disease, hypertension, heart failure, and stroke.