QUESTION 2 36 Marks WBM Ltd (WBM') is a luxury vehicle manufacturer situated in Walvis Bay. The company manufactures a wide range of exclusive luxury cars ranging from entry level 1-series vehicles to technologically advanced, X-series vehicles appropriate for the modem Namibian business and other professionals. You are the financial manager at WBM and you are in the process of finalising the financial statements of WBM for the financial year ended 31 December 2016. The functional currency of WBM is the Namibian Dollar (NS). As part of this process, you identified the following transactions that have not been accounted for in the financial records of WBM during the current financial year: Transaction 1: Foreign sales WBM entered into a non-cancellable transaction to export five WBM 1-series vehicles to a client situated in India on 1 January 2016 at INR73 685 per vehicle. The functional currency of India is the Indian rupee (INR). The cost to manufacture such a vehicle amounts to N$300 000 per vehicle. The vehicles were shipped free-on-board on 1 March 2016 and the vehicles arrived in Dew Delhi, the capital city of India, on 30 April 2016. The client paid WBM on 10 May 2016. In order to hedge the transaction against foreign currency fluctuations, WBM entered into a forward exchange contract (FEC) with VW Bank Ltd on 1 January 2016. The following exchange rates were applicable for the period under consideration: Spot rate Forward rate Buying Selling 1 January 2016 INR1= INR1= INR1= N$5,85 N$5.86 N$5.88 1 March 2016 INR1= INR1= INR1= N$5.89 N$5.90 N$5.91 30 April 2016 10 May 2016 INR1= INR1- INR1= N$5.93 N$5.94 N$5.96 INR1 = INR1= NA N$5.94 N$5.95 All hedging criteria were satisfied and it is the accounting policy of WBM to apply hedge accounting in terms of IFRS 9 Financial Instruments with hedging of firm commitments accounted for as cash flow hedges. WBM did not enter into any other hedging transactions