TaxTMI 
TaxTMI 
Dear All,
Please tell me, what is Derivatives and how we determine the loss or profit from derivatives.
Please also let me know that what is Hedge accouting.
Best Regards.
Pradeep kaushik
Derivatives and Hedge Accounting
19 Feb 2011 
1 Reply 
1290 Views Asked by
Derivatives risk management: amortise forward contract costs and accrue early cancellation gains until contractual settlement.
Derivatives such as forwards, futures, swaps and options derive value from underlying prices; when used as a hedge to reduce exchange risk, contract costs (premiums and bank margins) must be amortised over the contract term. If a forward contract is cancelled before maturity, any profit reported by the counterparty is typically settled only at the original maturity, requiring accrual of the profit on the cancellation date and recognition of the receipt at the contract due date. (AI Summary)
Derivatives such as forwards, futures, swaps and options derive value from underlying prices; when used as a hedge to reduce exchange risk, contract costs (premiums and bank margins) must be amortised over the contract term. If a forward contract is cancelled before maturity, any profit reported by the counterparty is typically settled only at the original maturity, requiring accrual of the profit on the cancellation date and recognition of the receipt at the contract due date. (AI Summary)