Cash flow hedge of future highly probable transaction

We entered into a call option to buy USD at a strike price of P45. This is to hedge a highly probable future purcha
Notional amount: $1,000

USD Spot FV of option

11/5/2021 45.00 5,000.00
12/31/2021 48.00 5,500.00
1/5/2022 49.50 4,500.00 Settlement date

Split accounting: entity only includes intrinsic as effective portion

Fair value = Intrinsic Value + Time value
Time value = is an adjustment for future uncertainty

11/5/2021 12/31/2021 1/5/2022

Intrinsic - 3,000.00 4,500.00 Benefit now of the option
Time 5,000.00 2,500.00 -
Fair 5,000.00 5,500.00 4,500.00

Hedged Item Hedging instrument

11/5/2021 No entry (future purchase) Option Contract 5,000.00
Cash 5,000.00

12/31/2021 No entry (future purchase) Option Contract 500.00

P/L Loss 2,500.00
OCI gain 3,000.00
To recognize changes in FV of the option (intrinsic change is OCI, tim

1/5/2021 Purchases 49,500.00 P/L Loss 2,500.00

Cash 49,500.00 Option Contact 1,000.00
($1,000 x spot rate 49.50) OCI gain 1,500.00
To recognize changes in FV of the option (intrinsic change is OCI, tim

OCI 4,500.00 Cash 4,500.00

Purchases 4,500.00 Option Contract 4,500.00
Reclassification adjustment/recycling To recognize receipt of cash from the option
Net purchases 45,000.00
y probable future purchase of goods from American supplier

6/49

2.00 5.00 20.00 36.00 24.00 28.00

Example:
if you get 3 numbers correctly: you win P20
if you get 4 numbers correctly: you win P500
if you get 5 numbers correctly: you win P5,000
if you get all numbers correctly: you win P600 million

36.00 5.00 24.00 28.00 2.00 49.00

EJ: Bilhin ko yung ticket mo for P700 (magkano na sigurado na makukuha? P500 intrinsic) P200 value to adjust for
EJ: Bilhin ko na yung ticket for P1 million (magkano na sigurado na makukuha? P5,000 intrinsic) P995,000 time valu

trinsic change is OCI, time change is P/L)

trinsic change is OCI, time change is P/L)

Cash ($1,000 x 49.50) 49,500.00 Receipt in USD

Option Contract 4,500.00
Cash ($1,000 x 45) 45,000.00 Payment in Peso @ strike price
trinsic) P200 value to adjust for future
000 intrinsic) P995,000 time value
Accounting:
Monetary items such as cash, receivables and payables Not revalued
Nonmonetary items such as PPE, inventory Revalued based on change in CPI
Retained earnings is a residual value/balancing figure

For example, we purchased a tract of land for 50,000 currency when the price index was 150
At year-end the price index was 180

On date of purchase, measure at 50,000 currency

At year-end, remeasure from 50,000 (150 CPI) to ? (180 CPI)
50,000 currency : 150 CPI
? currency : 180 CPI
50,000 divide 150 times 180 = 60,000 new value of the land

How much should be reported as land if hyperinflationary? 60,000 currency

You have a receivable from Alger 100 currency

Merong inflation na significant (50%), how much can you collect from Alger?
This is still valued at 100 currency

What if this was another asset na non-monetary? Eh di sana tumaas yung value
If revalued SANA 150.00
Actual value since monetary - 100.00
"Nawala" - Loss on purchasing power 50.00