In this video on Accounting for Derivatives Comprehensive Guide, we will understand accounting for derivatives.
#1 Forward Contract
A forward contract is simply a two party contract to buy or sell an asset at a specified point in time at today's agreed price.
#2 Futures Contract
Futures contract happens on exchanges between buyers and sellers that act as a market place.
#3 Options Contract
An option is a contract that gives the buyer the right, but not the duty to purchase or sell an underlying asset or instrument at a defined strike price at a given date, depending on the option form.
Treasury shares (own shares) are subtracted from equity.
The transaction costs of an equity transaction are accounted for as a deduction from dividends, net of any tax benefit.
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