Accounting treatment for future, options, forwards and swap contracts

A rapidly changing and evolving environment has given rise and increased the use of financial tools whose flexibility and adjusting capabilities to variable market conditions allow individuals and companies to achieve their operating, investment and financial goals. Within this framework, contracts for futures, options, forwards and swaps provide mechanisms with operating characteristics that allow their tenants to achieve alternative objectives such as the effective coverage of different risks or the attaining of profits or losses as a result of speculation. This article attempts to resume the operating mechanisms of futures, options, forwards and swap contracts and then concentrates into the accounting criteria that must be followed by financial intermediaries or entities to recognize the effects such contracts have on their financial position, operational results and cash flow.