Exporters/Importers booking a forward contract on basis of declaration : i) Turnover evidence either from audited Balance Sheet (provided it contains turnover data regarding exports/imports) or Chartered Accountant's Certificate. ii) Declaration confirming that the aggregate forward contracts booked is within limit.
A currency forward contract lets you lock in an exchange rate for up to 12 months to protect against market moves. Forward Contracts are primarily used to hedge the risk of exchange rate movements. This can help you or your business avoid the risks and uncertainties associated with adverse currency movements.
Today, forward contracts can be for any commodity, in any amount, and delivered at any time. Due to the customization of these products they are traded over-the-counter (OTC) or off-exchange. These types of contracts are not centrally cleared and therefore have a higher rate of default risk.
A deal contingent forward is a specialised forward foreign exchange (FX) contract. The hedging customer is only obliged to fulfil the contract if a planned major transaction, such as an acquisition, occurs.
A Forward FX contract is considered a financial derivative. Under IFRS 9, a derivative must be initially measured at fair value and subsequent value changes are recognized. Unless you are applying hedge accounting then movements must be posted to the profit or loss account.
There are two types of people who trade (buy or sell) futures contracts: hedgers and speculators.
Forward contracts trade in the over-the-counter (OTC) market, meaning they do not trade on an exchange. 1 When a forward contract expires, the transaction is settled in one of two ways.