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Smith Corporation, a U.S. medical device company located in Minneapolis, Minnesota. To cut the product cost, Smith plans to purchase some component of the Medfusion syringe systemfrom Rogalski Inc

Smith Corporation, a U.S. medical device company located in Minneapolis, Minnesota. To cut the product cost, Smith plans to purchase some component of the Medfusion syringe systemfrom Rogalski Inc., a supplier in Poland. Smith's CFO expects to place an order for 250,000 euros in three months. In contemplation of this future import, the CFO purchased a euro call option to hedge the cash flow risk that the euro mightappreciate against the U.S. dollar over the next three months. The CFO is aware that a foreign currency option used to hedge the cash flow risk associated with a forecasted foreign currency transaction may be designated as a hedge for accounting purposes only if the forecasted transaction is probable. However, he is unsure how he should demonstrate that the anticipated import purchase from Poland is likely to occur. He wonders whether management's intention to make the purchase is sufficient.

Required

Search and cite a specific paragraph in the Accounting Standard Codification that can help the CFO to determine whether management's intent is sufficient to assess that a forecasted foreign currency transaction is likely to occur. You may cite the implementation guidance and illustrations if appropriate.

Answer:

ASC

 
 
 
 

Aug 13 2021 View more View Less

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