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									TUTORIAL 308                                                       FEX 308/2008

On 12 June 2007 ALTO LIMITED, a company engaged in the retailing of household goods,
ordered goods from a supplier in US. On 25 September 2007 the goods were shipped from
the supplier in US in terms of a FOB destination agreement. The goods were received by
Alto Limited on 10 October 2007. The supplier will be settled on 31 January 2008. The
goods was invoiced at a price of $430 000.

On 01 September 2007 Alto Limited entered into a forward exchange contract to minimise
the risks of fluctuations in the exchange rate. The company entered into a FEC contract
for $430 000 which expires on 31 January 2008.

SCENARIO 1:
The company hedged the firm commitment in respect the goods purchased as a cash flow
hedge using the basis adjustment to account for deferred gains or losses as permitted by
IAS 39. In all cases the hedging relationship is designated with reference to changes in
the fair value of the forward exchange contract.

SCENARIO 2:
The company hedged the firm commitment in respect the goods purchased as a fair value
hedge using the basis adjustment to account for deferred gains or losses as permitted by
IAS 39. In all cases the hedging relationship is designated with reference to changes in
the fair value of the forward exchange contract.

The exchange rates were as follows [R = $1]:
                Date                      Spot rate FEC rate expiring on 31 January 2008
          12 June 2007                         7.45                 7.96
          01 September 2007                    7.68                 7.92
          25 September 2007                    7.96                 8.13
          10 October 2007                      7.82                 8.02
          31 December 2007                     8.18                 8.07
          31 January 2008                      8.12


REQUIRED:

Record the journal entries, including cash transactions, in respect of the goods imported for
the years ended 31 December 2007 and 2008 in compliance with the requirements of the
Accounting Standards. Support your answer with calculations and workings.

TUTORIAL 309                                                       FEX 309/2008

On 01 June 2006 FRINLUS LIMITED, a company engaged in the construction of residential
complexes, raise a loan of $400 000 from an investment house in US. The funds were made
available in South Africa on 30 June 2006. The loan bears interest at a rate of 12% which is
payable annually of 30 June and 31 December. The loan is repayable in four equal annual
installments of $100 000, the first commencing on 30 June 2007.
The exchange rates are as follows: [R:$]
           1-Jun-06                        6.90 : 1
          30 June 2006                     6.85 : 1
          30 September 2006                7.02 : 1
          31 December 2006                 7.46 : 1
          30 June 2007                     7.25 : 1
          30 September 2007                7.30 : 1

REQUIRED:

Record the journal entries, including cash transactions, i.r.o the loan transaction for the
financial years ended 30 September 2006 and 2007 in compliance with the requirements of the
Accounting Standards. Support your answer with calculations and workings.
               CF (OCI)                               FV (P&L)

FEC 1 sept            trans 10 oct              y.end 31 dec              settle 31 jan



      7.92                  8.02                    8.07                       8.12
 3405600                3448600                  3470100                    3491600
difference   -43000                   -21500                   -21500

spot rate                   7.82                    8.18                       8.12
                        3362600                  3517400                    3491600
                                      -154800                     25800
                                   loss                    gain

								
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