Definition
Currency-conversion derivative – A contract in which two parties exchange principal and interest payments in two different currencies. A company with a loan in US dollars but revenue or reporting in rupiah can use one to turn the dollar loan into a fixed rupiah obligation, which fixes both the interest cost and the exchange-rate exposure, in the same way it would if it had borrowed rupiah to begin with. The swap itself is carried at fair value as an asset or a liability and moves with exchange and interest rates, so a rising asset can offset a currency loss on the loan without being a cash gain. Found In: Notes to the financial statements (derivative financial instruments, borrowings), and the balance sheet