Forward exchange contract designated as a fair value hedge of foreign currency risk in a foreign-currency-denominated available-for- sale debt security, weakening $US On November 1, 2021, our company purchased a foreign-currency-denominated AFS debt security for 420,000. Our company plans to sell the security in three months (i.e., on January 31). The spot rate on the date the security is purchased is $1.28:1 and the company is concerned about the prospect of a strengthening $US that will reduce the $US fair value of the foreign-currency-denominated security. To hedge this risk, the company purchases a forward contract to sell 420,000 for $1.31:1 (the current forward rate) on January 31, 2022. Our U.S.-based company's functional currency is the $US. The spot and forward exchange rates and their effects on the recorded values of AFS security and the forward- contract derivative are summarized in the following table: FC AFS Security Derivative-Forward Date November 1, 2021 December 31, 2021 January 31, 2022 Spot Rate Carrying Change in ($US = 1) Value 1.28 $537,600 Forward Ratea FV Asset Change Carry Val. ($US = 1) (Liability) b in FV 1.31 1.30 546,000 1.33 558,600 $8,400 12,600 1.32 $(4,200) $(4,200) 1.33 (8,400) (4,200) a For settlement on January 31, 2022 b Ignore discounting in the computation of fair values.