Positivity Ltd is a New Zealand exporter. The exporter wants to limit the effect of currency fluctuations in the next year by hedging forecasted USD-denominated sales. It expects to sell US$500,000 of goods on 31 July 2021, and it expects to receive the payment on 31 October 2021. Therefore, on 31 July 2020, it enters into a fifteen-month forward contract with the bank to sell US$500,000 and receive the agreed number of NZ dollars on 31 October 2021 (at a forward rate of NZ$1 = US$0.7).

You can assume that the goods of US$500,000 were sold on 31 July 2021 according to the plan. Also, assume that this is an effective cash flow hedge and the change in fair value of the forward contract before the forecast sales is 100% effective, under NZ IFRS 9.

Relevant exchange rates (i.e., spot rates and forward rates for 31 October 2021 delivery of cash) for transaction dates and balance dates (30 September) are provided in the table below. The table shows the number of US$ one gets on delivery of NZ$1 (i.e., NZ$1 = US$). You are also given the fair value calculation of the forward contract over the 15 month contract period.

Date	Description	Spot Rate	Forward Rate	Discount factor (6% per annum )
31-Jul-2020	Enter into forward	0.7	0.7	0.9279
30-Sep-2020	Balance date	0.74	0.77	0.9372
31-Jul-2021	Date of sale	0.71	0.73	0.9851
30-Sep-2021	Balance date	0.74	0.75	0.9950
31-Oct-2021	Settlement date	0.73	0.73	1.0000

REQUIRED:

• In accordance with NZ IFRS 9, using WORKSHEET 3, disclose the forward contract and the sale, including related gains, losses and the effect on retained earnings, by completing the relevant parts of the Balance Sheet as at 30 September 2021, and the relevant parts of the Statement of Comprehensive Income for the year ended 30 September 2021.
• Show your working.

• WORKSHEET 3 continued: Statement of Comprehensive Income extract for the year ended 30 September 2021
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  Income and expense (P&L)
  Other Comprehensive Income:

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Forward PV Forward Contract Asset and ability Contract amount US$500,000) Fair Value Change Date Rate NZ$ Value of Aset - FUTD NZS value of Liability Net (A-L) Factor of Forward In Fair Value 31 20 0.7 714 286 714286 0 0.9279 0 30 Sep 20 714,286 649,351 64935 0.9372 50.857 50.857 31 Jul 21 073 714 286 684.932 0.9851 28,917 31.9401 29354 47519 075 714 285 0.9950 47 381 18,4641 30 Sep 21 31 Oct 21 666,667 684,932 073 714286 29354 10000 29,354 18,027 Forward PV Forward Contract Asset and ability Contract amount US$500,000) Fair Value Change Date Rate NZ$ Value of Aset - FUTD NZS value of Liability Net (A-L) Factor of Forward In Fair Value 31 20 0.7 714 286 714286 0 0.9279 0 30 Sep 20 714,286 649,351 64935 0.9372 50.857 50.857 31 Jul 21 073 714 286 684.932 0.9851 28,917 31.9401 29354 47519 075 714 285 0.9950 47 381 18,4641 30 Sep 21 31 Oct 21 666,667 684,932 073 714286 29354 10000 29,354 18,027