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Hi Professor Farhat, I have some reservations about the explanations. Overall, I think the firm in question made a gain of $100 on this transactions and not a loss of $400, which is the net of the two accounts closed to the income statement. The reason why I think a gain was made is because, the firm sold 10,000 Pesos for 9.48 on December 1, 2008. But if it had waited until March 1, 2009, it would have only sold the Pesos for 9.47. By selling early, the company made more money overall on the hedging transaction. Let me know your thoughts, please. Thanks!
I feel like it wasn't explained well why there was a foreign exchange loss of 400 regarding firm commitment, rather it felt like it was dumbed down to 'it's a FV hedge so if there's a foreign exchange gain then there should be a foreign exchange loss'. Do the problems always state if it's FV or CF hedge? Or we have to determine that?
Sorry to say the slides were poorly made. You initially said the firm was to sell the equipment. Then in the same paragraph, you said the firm will take delivery and pay for the equipment on 3/1/2009. It is so confusing!
Hi sir, At the year end you have recognized a commitment as a liability in order to nett off the gain on the hedge instrument. This commitment account can be used even if we have a purchase of an asset???
Professor Farhat, can you please explain a little more about the foreign exchange loss of 400? I do understand the gain, but where is the loss coming from? Thank you so much for your help!
The slides are terrible, and the explanation on the area is confusing, not clearly stated. Other videos are exceptionally informative but not in the area of hedging unfortunately
Hello Professor Farhat, im so impress the way you discuss the Lecture... Thank you for sharing your Knowledge
I've watched all four videos on foreign currency and hedge. Very informative!
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social media.
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Website: farhatlectures.com/
Hi Professor Farhat, I have some reservations about the explanations.
Overall, I think the firm in question made a gain of $100 on this transactions and not a loss of $400, which is the net of the two accounts closed to the income statement.
The reason why I think a gain was made is because, the firm sold 10,000 Pesos for 9.48 on December 1, 2008. But if it had waited until March 1, 2009, it would have only sold the Pesos for 9.47. By selling early, the company made more money overall on the hedging transaction.
Let me know your thoughts, please. Thanks!
I feel like it wasn't explained well why there was a foreign exchange loss of 400 regarding firm commitment, rather it felt like it was dumbed down to 'it's a FV hedge so if there's a foreign exchange gain then there should be a foreign exchange loss'. Do the problems always state if it's FV or CF hedge? Or we have to determine that?
In the Dec 31 entry, should it be "FC Payable TO Exchange Dealer"?
Sorry to say the slides were poorly made. You initially said the firm was to sell the equipment. Then in the same paragraph, you said the firm will take delivery and pay for the equipment on 3/1/2009. It is so confusing!
Hi sir,
At the year end you have recognized a commitment as a liability in order to nett off the gain on the hedge instrument. This commitment account can be used even if we have a purchase of an asset???
Professor Farhat, can you please explain a little more about the foreign exchange loss of 400? I do understand the gain, but where is the loss coming from? Thank you so much for your help!
Which minute are you referencing?
17:18 takeaway
The slides are terrible, and the explanation on the area is confusing, not clearly stated. Other videos are exceptionally informative but not in the area of hedging unfortunately
made a simple thing look complicated. I doubt if your understanding are clear on fair value hedge!!!
Thank YOu.