Oanda corporation Revision 5

Hedge Accounting Treatment document.  

 

 

We hope this document has helped clarify some of the basics of foreign exchange hedging for 

corporations. If you have further questions or concerns, please do not hesitate to contact us.  

 

 

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Forex Hedge Accounting Treatment  

OANDA’s FXConsulting 

 

for Corporations

   

20 

 

Case Study #1- Economic Forex Hedge – Not Designated – 

Accounting Entries 

Company: US Gadget, a US dollar reporting company with sales in Europe. 

Scenario: US Gadget completed a sale to a European customer for 100,000 euros on December 15 and 

expects to collect the euro receivable in 45–65 days. The current EUR/USD exchange rate is 

1.4677/1.4678.  (The first amount listed is the sell rate and the second amount listed is the buy rate. The 

first currency listed is known as the quote currency and always equals 1. In this case, therefore, you 

would sell 1 EUR and buy 1.4677 USD.)  

Outcome: US Gadget’s 100,000 euro sale is equal to USD$146,770. To protect the future value of this 

receivable, US Gadget enters into a spot transaction on an online forex trading platform, selling the 

EUR/USD currency pair today at 1.4677 and locking in the future value of the $100,000 euro 

receivable.  

We will assume for the entire transaction timeframe that the interest rates are as follows: