Derivative Financial Instruments

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..... res, currency etc. Example - Derivatives such as Options, Interest Rate Swaps, Currency Swaps and Futures Forwards. Following condition should be satisfied to be classified as Derivative: Its value changes in response to change in underlying assets. It requires no initial or very less investment than it would be required otherwise to enter into contract in normal course. It is .....

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..... orward is ZERO. If the net fair value of the right and obligation is not zero, the contract is recognised as an asset or liability At each Balance Sheet Date Difference between price of underlying asset on Contract Date Balance Sheet Date to be recognise. If Field rate is also given, then consider Present Value of above amount as Fair Value. Journal Entries On Commitment .....

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..... tract) If Contract is for purchase of Underlying Asset Underlying Asset (Fair Value) Dr. XXX Derivative Financial Liability (if any) Dr. XXX To Bank (Initial payment amount) XXX To Derivative Financial Asset (if any) XXX If Contract is for sale of Underlying Asset Bank A/c (Receipt of Initial Amount) Dr. XXX Derivative Financial Asset (if .....

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