Abstract:

As a result of foreign currency operations are subject to exchange rate risks due to changes in exchange rates. Businesses appeal derivatives to eliminate the foreign currency risks and for exposuring minimal impact from the foreign currency risks. One of these derivatives is the foreign currency option contracts. In the first part of the study, theoretical information about foreign currency option contracts will be presented. Following this part, an accounting case -based on the framework within the draft plan by Turkish Accounting Standards Board - that involves foreign currency option contracts in purchasing operations. In the example case it can be observed that the firm can be less affected by exchange rate increases by purchasing foreign currency option contract.

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