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How the options and futures should be accounted for

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Reference no: EM132942538

Nereus Elevation & Storage Ltd. (NES) operates grain elevators in southwestern Ontario. The company ordered £66,000 of grain handling equipment from a Scottish manufacturer on November 1, 2020. The equipment will be delivered on December 15, 2020 and has 30-day terms. On November 15, 2020 NES Ltd.'s treasurer decided to hedge the purchase with a forward contract. The forward rate on November 15 was 1.71 CAD/£. By December 31, the market rate had increased to 1.73 CAD/£, before it fell back to 1.67 CAD/£ on January 15.

Problem (a) NES has issued compensatory stock options to its CEO and three executive vice-presidents for the first time this year. You've reviewed the definitions of financial instruments, financial assets, financial liabilities and equity instruments. Provide some GAAP information to the accounting group to help them understand how the options and futures should be accounted for.

Reference no: EM132942538

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