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.

Question

Quizplus · Accepted Answer

The discount or premium on a forward contract entered into as a hedge of an exposed asset or liability position should be amortized over the life of the forward contract. This is because the discount or premium represents the difference between the forward rate and the spot rate, and this difference will be realized over the life of the contract.

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