Problem: HEDGING TRANSACTIONS
On September 30, we enter into a futures contract to hedge the value of gold which we will use in our manufacturing process and report on our balance sheet at $500,000. On December 31, the market value of gold has declined to $450,000. However, the futures contract that we had purchased increased in value by $45,000.
Task:
Prepare a PowerPoint slide presentation illustrating the following:
a) The basics of a hedge instrument
b) Recognition criteria under a GAAP versus IFRS basis
c) How much net profit or loss will we recognize?
d) How any profit or loss will be recognized under a GAAP basis?
The response should include a reference list. Using double-space, Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.