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12. Before we, go in to the facts of the present case, let us understand, forward contracts, speculative transactions, hedging, foreign exchange loss and treatment of loss in the books of account. A forward contract is a agreement between an enterprises and a banker to purchase or sell a particular quantity of currency for a mutually agreed price at a particular date. These forward contracts are used by exporters to get their export receivables hedged against adverse currency movements. Hedging is defined as to enter in to transactions to reduce the risk of adverse movement of currency. Any person having exposure to foreign currency may enter into hedging to fix his cost and profits at a particular level. Therefore, forward contracts means entering into agreement with bankers to hedge the currency fluctuations to mitigate the loss in the course of import/export business. Forward exchange contracts and treatment of any profit/loss arising on cancellation or renewal of such forward exchange contracts has been dealt by Accounting Standard-11 issued by the Institute of Chartered Accountants of India, in paras 36, 37, 38 & 39. According to the AS-11, of ICAI, any forward exchange contracts entered to hedge the foreign currency exposure, to mitigate unexpected loss with its import/export business has to be regarded as business loss and income as the case may be. In case of such forward exchange contract is not in the nature of hedging, then such loss should be ignored.