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How forward contracts would be classified under aasb

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Reference no: EM132609256

Richard Smith Ltd is an Australian retailer that sells a wide range of consumer electronic goods through a network of retail shops and online. Recently, one of the company's directors, Karen Brown, expressed interest in the company making use of forward contracts. Because Karen does not know much about forward contracts, she has requested the company's Chief Accountant, Elizabeth Wright, to provide her with some basic information. Elizabeth Wright has requested that you draft a memorandum to Karen Brown for her signature.

Required

Draft a memorandum addressed to Karen Brown for Elizabeth Wright to sign that explains forward contracts. An example of the memorandum format is included at the end of this assignment. Your memorandum should address the following topics:

Question 1: Briefly explain what a forward contract is and how forward contracts differ from options and futures.

Question 2: What are the two types of forward contract? Under what circumstances would a profit or loss be made on a forward contract?

Question 3: Explain how forward contracts (including forward contracts for shares) can be settled.

Question 4: Explain how forward contracts would be classified under AASB 9 Financial Instruments? What are the recognition and derecognition criteria for forward contracts?

Question 5: Explain the measurement requirements (on initial recognition and subsequent to initial recognition) for forward contracts in AASB 9 Financial Instruments.

Reference no: EM132609256

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