Under U.S. GAAP, what method of amortizing discounts or premiums on forward contracts must be used?
A) Weighted average method or accelerated method
B) Sum of digit method only
C) Effective interest rate method or straight line method
D) Straight line method only

Question

Quizplus · Accepted Answer

Under U.S. GAAP, the effective interest rate method or straight line method must be used to amortize discounts or premiums on forward contracts. The choice of method depends on the circumstances of the contract and the financial reporting objectives of the entity. The weighted average method and accelerated method are not appropriate for amortizing discounts or premiums on forward contracts. The sum of digit method is also not commonly used in this context.

Under US GAAP, What Method of Amortizing Discounts or Premiums on on Forward