Foreign currency embedded derivatives Company A, an Indian company whose functional currency is rs enters into a contract to purchase machinery from an unrelated local supplier, company B. The functional currency of company B is also rs. However, the contract is denominated in USD, since the machinery is sourced by company B from a US based supplier. Payment is due to company B on delivery of the machinery. 

Key terms of the contract: 

Contractual features Details Contract/order date 9 September 20X1 Delivery/payment date 31 December 20X1 Purchase price USD 1,000,000 USD/` Forward rate on 9 September 20X1 for 31 December 20X1 maturity 67.8 USD/` Spot rate on 9 September 20X1 66.4 USD/` Forward rates for 31 December, on: 30 September 31 December (spot rate) 67.5 67.0 

Company A is required to analyse if the contract for purchase of machinery (a capital asset) from company B contains an embedded derivative and whether this should be separately accounted for on the basis of the guidance in Ind AS 109. 

Also give necessary journal entries