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Question: A U.S. exporter has a Thai


A U.S. exporter has a Thai baht account receivable resulting from an export sale on June 1 to a customer in Thailand. The exporter signed a forward contract on June 1 to sell Thai baht and designated it as a cash flow hedge of a recognized Thai baht receivable. The spot rate was $0.022 on that date, and the forward rate was $0.021. Forward points are excluded from the assessment of hedge effectiveness. Which of the following is true with respect to the forward points on this contract? The forward points are a
a. Forward contract discount that is recognized in net income as a foreign exchange loss.
b. Forward contract discount that is recognized in net income as a foreign exchange gain.
c. Forward contract premium that is recognized in net income as a foreign exchange loss.
d. Forward contract premium that is recognized in net income as a foreign exchange gain.

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