A transaction gain or loss is reported currently in the determination of income if the purpose of the forward contract is to:
A) hedge a net investment in a foreign entity.
B) hedge an identifiable foreign currency commitment.
C) speculate in foreign currency.
D) none of these.

Question

Quizplus · Accepted Answer

A transaction gain or loss is reported currently in the determination of income when the purpose of the forward contract is to speculate in foreign currency. Hedges of net investments and identifiable foreign currency commitments typically qualify for hedge accounting, which can defer recognition of gains or losses.

A Transaction Gain or Loss Is Reported Currently in the Determination