an intention of exchanging two different currencies at a specific time in the future. In this situation, a business makes an agreement to buy a given quantity of foreign currency in the future with a prearranged fixed exchange rate (Walmsley, 2000). The move enables the parties that are involved in the transaction to better their future and budget for their financial projects. Effective budgeting is facilitated by effective understanding about the future transactions’ specific exchange rate and transaction period. Forward exchange rates are created to protect parties engaging in a business from unexpected adverse financial conditions due to fluctuations on the currency exchange market. Commonly, a forward exchange rate is usually made for twelve months into the future where the major world currencies are used (Ltd, (2017). Here, the currencies that are commonly used include the Swiss Franc, the Euro, US dollar, Japanese yen, and the British pound. Forward exchange contracts are entered into mainly for speculation or hedging purposes. The use of forward contracts is mainly applied by any business that is either selling or buying a foreign currency that may be interested in managing the risks that are associated with the currency fluctuations. Through the use of the method, such a business can ease the effect of those variations of the cash flows and the stated incomes of the business entity. The risk can be avoided by making an arrangement with a business entity to sell or buy the foreign currency at a specific future date at an approved rate (Walmsley, 2000). Here, both parties are required to match the date that the currency is anticipated to be received. These arrangements are made through the bank where each contract is associated with a specific transaction or sometimes use a number of contracts to cover a pool of transactions (Parameswaran, 2011). Based on the SSAP 20 in the UK GAAP, the foreign currency translation that provides the option of translating a transaction at the prevailing rate at the date the transaction happened then a matching forward contract rate should be created. In a situation where the forward rate is used, then no losses of exchange gains should be recognized in the books of accounts when both parties are recording the sale and eventual settlement (Parameswaran, 2011). In this situation recording the transaction between Pamela and Tommy Date Here, assuming that Pamela applies the forward rate of translation the accounting