So, Jarrett, Ransom, take it away, sister. Absolutely. Thanks so much. I know we dove right in and I'm excited for the conversation too. But I'm also excited every single episode when I see these presenting sponsors, logos right on the screen. These are companies that support the nonprofit show. They support these episodes, but they support you. They really lean in and they exist to elevate you, to elevate your mission-driven purpose and your causes around the globe. So, please do check them out. Give them a like, some love, follow, and reach out to them. If any of them can help you. I will give you a little nugget. Bloomerang, Stephen Shaddock, helped us secure today's guest. So, we're excited for that. Welcome, Julia Patrick, CEO of the American Nonprofit Academy. I'm Jarrett Ransom, also known as the Nonprofit Nerd. So, that's my mascot that we're going to talk about today, CEO of the Raven Group. And this week has been chocked full with so many amazing guests. And we have even more guests coming on. We have, I was just looking at the lineup actually. So, tomorrow we'll be talking about Impact Method with Sarah Oliveiri. And then next week, we're talking about Nonprofit Compensation with Nonprofit HR. You don't want to miss that. Clause Selling again with Fundraising Academy. And also some conversations about how you can be more value-based in your deliveries and in your non-profit at large. But today I am thrilled to announce and to share with you our guest, John Lep, partner at Agents of Good, already a phenomenal person, human being, we can tell. Because we've had such a great conversation with you already. Welcome, John. And thanks for joining us today. Thank you so much for having me. Much appreciated. Okay, so we always love it when we have international guests. Because it makes us feel like we're really, you know, hopping in a poppin' when we get somebody. So, we haven't had an international guest for a while. Tell us where you are. Well, I'm not that international. I'm up here in Canada, about 40 minutes outside of Toronto. And yeah, I mean, it's a really amazing privilege to be able to go around the world. This is when we could do that. And tell great stories of the work we get to do. And so, I love venturing down to my friends in the U.S. and share the love the best I can. Well, you told us something interesting in the 2D Chat Chat, before we got started, was that you really had built your business in a remote way. You worked with people across Canada.  The idea was, yeah, it was always supposed to be a collaboration, you know, like the business. I never believed the idea that you had to have all the knowledge in the world in one building with four walls. And it never made any sense to me. And so, even as a business, you know, Twitter allowed us to reach out to some of the top minds in the world. And for me, it'll call my friend Mark in the UK, because Mark is one of the best fundraisers in the UK, and say, Mark, I have this problem and I need help solving it. Mark's like, what can I tell you? Even my own staff, again, we're scattered all over the place. It's not about where you are. It's about what you know. And to have a relationship where you can call on anyone anywhere is, like I said, it's such an amazing privilege. I'm really, really happy. Wow. Yeah. You know, I love it. So I would say, John, when the rest of us were like all freaking out wondering what we were going to do, you knew what to do because you had been working in this, in this environment with this cadence. Yeah, the joke was I was already socially isolated. So again, there wasn't really a big change in terms of our working relationships. We were very used to working with each other across Skype, across student calls with our clients and with each other. So there wasn't really any effect there in terms of the pandemic or how we work together at all. Well, I think it's old news. Yeah, really, old news. And I think what it probably does, it allows us to even get deeper into this concept. Because if you were innovating before you're forced to, certainly that speaks to the whole issue of how you have navigated your clients to this mascot position. We heard about you through, as Jarrett mentioned, Steven Shattuck of Bloomerang. And he was like, the hummingbird guy, the hummingbird guy. You've got to get the hummingbird guy. OK, so tell us about the hummingbird. So the hummingbird, Ruby, the hummingbird came as a part of a pact we did for an organization called Ontario Nature back in 2009, I think. Ruby came about because the organization had been doing the same thing the same way in terms of storytelling, in terms of its appeals. And we had this great story about bird strikes, which is actually a pretty sad story about these birds who fly all the way from Costa Rica up through the US and into Canada. And as they try to get into Northern Ontario and into Northern Canada, they were basically flying into buildings because all these buildings leave the lights on every night. So the organization was taking the government to court to challenge this idea of leaving all these lights in these buildings on because these birds were dying. That's a big problem, obviously, and stuff. So we thought, who better to express the villainy, if you will, than Ruby, the hummingbird.  And that was all there was. So in the context of jargon, what better jargon is there than the bird nerd prints of this hummingbird? The bird nerds in the group knew what it was. So it became a very provocative Etter Envelope. Like, what is this? Why am I getting an envelope with two bird prints on it? And Ruby actually wrote the letter to the donors expressing what the problem was and having to be a part of the solution. So fundamentally, we do this because changing the voice that the voice of the organization instantly gets donors' attention because it's so different than Julia, how you would sound or how I sound. And usually, most organizations only rely on one voice.  So we're always asking, what's a better voice to tell the story than this voice? This is great. Well, and I would like to address why I'm wearing a sequin dress today. Sorry, John, it's not for your presence. But immediately after this, I am leading a discussion on innovative disruption. And as we continue to talk about this topic for today, this is even an example of how you can be a disruptive innovator, right? How do you tell your story in a different way? Do you share your mission using another voice and even the penmanship of a bird? So I think this is amazing. We all have an opportunity to think differently so that we can not continue to do the same things and continue to expect the same results. Again, that's the definition of insanity. So how might we look at our storytelling differently and innovatively to bring in a mascot? It's really an interesting thing. So one of the things I'm hearing you say is that with this visual storytelling, you're also doing it primarily in first person from the voice of that mascot. Absolutely. And that's... It seems like a small thing. And most organizations are largely uncomfortable with it because it feels a bit childish in some cases. Trust me, I've told stories from trucks, caribou's, Santa Claus, birds, bags. And I always raise a ton of money. Donors love this stuff because it's so surprising. It's delightful. Even if you're talking about a serious topic, you're still... The donors react in a completely different way because it's just far more engaging. And again, it allows me as a storyteller to actually use very emotional, very vulnerable language and talk in a very real conversational kind of way where most professional EDs are not comfortable appearing. You know what I mean? Like that stuff has to go. Like we're past that now. If you're not comfortable being vulnerable and emotionally storytelling, then go work at a bank. Like I just don't understand why we have all these people here who don't like this stuff. I'm not here to make you like it. I'm here to help you fundraise so you can do better in terms of meeting your mission. So get out of the way of that. Stop messing about with it. Snaps to you, that's what this was, right? Like snaps to that. And I love this. And as we continue, excuse me, to talk about how we engage multigenerations in our fundraising, in our organizations, in our civic engagement and our community at large, I think we can all relate to visual storytelling, right? And as you said, John, you know, this isn't for kids. This is for everyone. And this is a great way to integrate multi-generational opportunities. And so John, you're not, I mean, we're looking at some artwork that you did in a campaign for camp and you talked about the hummingbird. I mean, that's not a child's issue. That's like, that's a natural issue. So would you say that the majority of your clients are embracing this type of storytelling that even if they don't have any connectivity to something that would be interesting, interesting to children or wrapped around that? I mean, it can be, it really doesn't matter, I guess is what I'm hearing you say. Doesn't matter. I mean, it's not something we'd go to time and time again. It's just a small part of our storytelling or the sort of tools we use to tell great stories. But again, I think donors of any age, again, it's just so different than what they're used to seeing, which is very boring, which is very dry.  And I just, the spring went through her mailbox of 60 packs. And I would say most of the packs are exactly the same. A lot of people don't understand basic storytelling or even just basic tactics in terms of how to tell engaging stories. This isn't to do with appearing childlike or unprofessional. It's just about doing something more engaging. Even this stuff here creatively is just more engaging to look at, to engage with, and there's a lot of really nitty-gritty scientific things happening here too in this work. It's not just doing what we feel is the right thing. It's rooted in actual science and testing. We know that. So share with us what that looks like to you. Like when you, what is some of that connectivity that you've noticed? Well, again, I mean, just in terms of basic fundraising and storytelling, I mean, you have to have a problem that a donor can help solve. So if I'm a donor who gives you $25, asking me to solve a $10,000 problem is not cool. And so again, what is the problem I can help solve? How can I be a part of that solution? What's the action you need me to take? Is this an urgent problem? Classic cases, why me, why now? You know, your fundraising, your direct mail has to answer those two basic questions and most people don't even get to asking or saying what the problem is or actually asking for something. Or, you know, even the other envelope, I joke with people, I obsess over other envelopes. I lie awake at night thinking about other envelopes because if I make, if I get that wrong, I don't care if Tom Hearn wrote the letter or Jen Love wrote the letter or Jeff Brooks wrote the letter, no one's gonna see it. And therefore I've failed everybody. And so again, I can see- They all get opened. Yeah. And I see these 60 packs from this donor like Dale and they're all white number 10 envelopes with a little tiny crappy photograph on it. Some tagline that has nothing to do with anything and people don't understand the how important these pieces actually are. And again, this information is out there. It's not like I'm, it's not like I've just made all this stuff up. All this information is out there. You can read books and learn these things. But you have a lot of people who just don't understand basic principles of direct response. I forget what story telling, which is a creative, it is a creative pursuit, but just even the basics are completely misunderstood, sadly. You know, we have a guest on recently who said that millennials are really responding well to direct mail because so much of what they would have normally received has gone digital. So their invoices, their bills, their invoices, their, you know, general communications are not, are not snail mail. And so when something does get into their mailbox, it's like, I've got mail.  And I'm wondering what you're seeing, is that true in the case of working with your nonprofits? I mean, when I think of donors, I'm thinking mostly of women who are 65 to 95 years old. And I would say the true, the same is for them as well. They get a lot of email for those who have email addresses, but they, and they get a lot of mail too, like Dale does. But again, most of it looks like a bill. The best direct response looks like a personal piece of communication from me to you. And so she's going through the mail, just like, we all do bill, bill, bill, bill, bill. Oh, this is nice. What is this? This handwritten, it's got my name written. I've got a bunch of stamps on it. Like if there's feels like there's something inside, I wonder who this is from and they engage with it, right? And so again, et cetera, why I don't understand why people don't understand this or think, oh, this can't be true. Like we have to be, again, this idea of being professional and we use this whole idea of branding as like some sort of weird bubble wrap. It's like a protection system. So we can't be judged too harshly. It's just gotta go. It just, we have to stop doing this kind of work because you're leaving so much money on the table. Dale wants to help so badly and we do everything we can to get in the way of letting her do what she wants to do, which is help us. Thank you. Thank you for like shaking it up and telling us what we really need to be thinking about. It's great. Show us the next slide, Julie. Yeah, we appreciate it. Show us the next slide because we really want to talk about things to the heart of it, right? Like, you know, what's it look like? I can't not imagine and you're right. It was a sad that it comes to Ruby, the hummingbird and why this campaign really needed to even come to fruition. So how did it to the heart of mascot and storytelling and how this really does come to fruition? Well, part of it is having a, you know, working with organizations who do trust that kind of work. You know, we're fortunate that we are, we've shared what we think about this work for so long that most people come to us kind of have seen the stuff. Obviously, if we didn't know what we were doing and our work didn't work, we wouldn't be here at all. So I think that having that trust is really, really important. This kind of work isn't going to break anything. I think people think our donors are going to hate it or they're not going to give to it. And again, that's, I've never seen proof of that in any of this stuff. Donors want to feel engaged and appreciated by their organizations. And so I think we spend the time to sort of take a step back and go, what's the story we're telling them this year? Like, what are the things we know our donors care about? What are the values that we can pull on because there are values we share with one another as an organization, as other human beings. And where the stories that will help in terms of sharing some of these values and just connecting with them on a more deeper level. So we use things like this engaging illustrations and our work because again, photographs can only go so far sometimes. Sometimes you need to do something a bit different. And there are so many amazing artists out there who can help bring this work to life in a totally different engaging way. And the donors are not going to look at this and think, I've seen this a million times up on a billboard here and there, this looks something very different. And we actually had a donor who wrote in and said, they don't usually give to direct mail, but they love this piece so much that they felt engaged to give. And they were in awe of the artistry of these field workers, even though it was our illustrator who did all the illustrations and made them look like they were done by people in the field. So again, you do create a different level of a relationship with these donors. It's not like I want all these donors to be our best friends, but you do create more human connections with other donors because we're being human and we're sharing human things in human, emotional, vulnerable way. So important. And this artwork is beautiful. Yeah, this artwork is stunning. John, I'm curious when you look at these campaigns as we've had on the backgrounds of our slides, are these done like once a year at a certain time or are you working with your clients to do this type of a message throughout the year several times or what does that look like in the relationship of all the other marketing and communications? We always start with what's the story we're telling. What's the story we're telling and what are we asking for? And I always start with the ask first. I have to know what I'm asking for because I'm trying to determine what the story is and need to tell to highlight why I'm asking for this thing. And in an organization, you need to know what you're asking for. Why me and why now? And if you can't answer that, then forget about everything else. You're told that every conference, you need a story, you need a story, you need a story. You actually don't always need a story, but you do need a problem. And so when you focus on the problem, and our work is very immediate. It's very much in the right now. Because as we all know right now, our world is changing. Every single, we have one organization in the last two days, we've changed the direction of mailing three times because the world they're living in is changing. The world their donors are living in is changing. And so you have to adapt to that. I don't understand. We have friends who work at agencies who are developing Christmas packs right now. They're talking about snow flying and ornaments and right now because it's great for them. They get done, it's sent off to China to get all the labels done and all the pens and socks and calendars. And that's what's convenient for them. It's not convenient for donors. It will mean nothing by the time it gets into their hands. So I think we always want to attain a certain level of intimacy and immediacy with the world and what's going on. Because that's what this, there are donors who sit at home picturing people, women sitting in church basements pounding the stuff out on typewriters because at that moment they need something from these people. And I think we have to retain that. It's not easy work for us to do it that way. It's harder work, but it's more important and more valuable to donors. Wow. How long is it? So I'm kind of wearing my publisher's hat that I did for 30 years. So this is a technical question. And because you brought this up, I mean, in my world I would have been like, we got to be working on Christmas now. I'm one of those people you were just talking about. So walk me through the process of timing then.  I mean, this work is not easy that you're doing. You're not just using clip art. I mean, this is actual custom work that's being refined and refined and refined. What is the time investment of that for a client? It really does depend. I mean, so Veronica McGrath, who I work with NBC, she's really good at turning around just simple little sketches within a day or two if I need it. But we started nowhere to go. Like when Jen and I established what the problem is and what the story is we're gonna tell, I can immediately start to think about, well, how do I want to tell that story and what am I going to need? Another artist we use, Jessica Ray Gordon here in Toronto, she does beautiful, like it is art. I have a lot of her art hanging in my house because it's gorgeous and it does take time. So she needs a few weeks to actually do her own sketches first and then actually do all the coloring and painting and clipping and all the work that she does. So it does depend, but we have to sort of take that into account the best we can. And sometimes I don't have two weeks. Sometimes I have to get something out tomorrow because that's where we're at. And we react to that, you know? I have no preconceived notions of when I start packing what I want it to be. I wait until I figure out what the problem is and everything else and how much time I have to solve the problem and then go from there. There is no standard amount of time for anything. So that's probably that leads us to our next question and that is the stories that you have and the connectivity that your mascots and your design is actually creating. Talk to us about that. Because I think that's really interesting that people are assigning value to these illustrations. Because I think the moment they get something in their mailbox from something like this, this is my friend Phil, I was introduced to Phil. They know this is different than something they're used to seeing. And so again, that immediately makes it engaging to them. And so when we sent Phil out for the first time in the fall pack, Phil was very clear on what the problem was in the community in terms of people, neighbors needing help. He stepped out of the sort of the professional zone of the ED who wrote the main appeal and was able just to be very clear on what the problem was. And donors responded very well, you know, just in terms of they made notes on the reply forums about Phil. And so we actually, we had Halloween coming, not another appeal, just Halloween. And so we got Phil dressed up as a ghost for Halloween and just used digitally. We just went out on Instagram and through emails. And again, he could have some fun with it. He talked about getting dressed up. He wanted to see pictures of donors as them dressed up. And you know, Halloween is scary, but you know what else is really scary? Hunger in our community and people needing food is also very scary. And if you could help, that'd be amazing. So donors are, you know, you're having fun, you're giving with a smile on your face, you know, and just a bit of like, this is different than how I'm used to giving to organization. Giving isn't always, it doesn't always have to be transactional. And Phil, again, this was a holiday appeal and we created this ornament where donors could just share some words about, you know, why they support this organization, who they're thinking of when they give, something just very simple and emotive. And you get the most brilliant things back from donors. And I always share a note that we got from a 90-year-old donor about why she gives to this organization, but she's talking very emotively to Phil, saying some really profound things.  And I also think it's really sad that we've created an atmosphere in our sector where donors are having these emotive conversations with talking hearts like Humbert back here or Phil, the bag, but not with us as humans and EDs. We've created this atmosphere and it's our job to fix it. It's not the donor's job. And so I think that's the real, that's the real question is how do we change this? How do we get back to letting donors talk to us? So we're always creating opportunities for donors to tell us things about them, share their stories. We're really good at asking them and talking to them all the time. We're really crappy at letting them talk to us and share their story. Now, disruptive question. Have you seen Phil or any other mascot go from 2D to 3D, right? Like, you know, when we grew up as a child, our schools had mascots, they were under the mask. There was someone under that. In fact, the hometown that I'm from, John, in South Carolina was a mascot manufacturer and literally made, I know, I remember passing this building, a huge aluminum building.  Have you seen someone like Ruby or Phil or anything at any, I don't mean to say thing, any other mascot, representative mascot turn into more or less that physical presence? Yeah, I mean, Phil is a case in point. Phil worked so well through the candy, they actually did the game turned into a mascot. They take the hockey games, you know, around the community parades. And I was joked, like, you know, he's really made it as a creative. When they do that, same with my friend, Humbert, back here, he's an actual stuffy, but he was a character we used for a possible foundation here in Ontario to tell great stories. And we got the stuff he made and we were gonna share with the right kinds of donors just to have a different connection. But yeah, we've had a few instances of that. It's like, you really feel like it's like you really feel like you've made it when they do that. So Phil's still in the community raising funds for organization that he's obviously very deeply connected to and donors are still engaging with him in a very creative, fun way. It's brilliant. And I love this. So the little script here, please don't take it off the screen, Julia. Remember me? I'm Phil, the food drive bag. Like perfect, right? Goes on to say, and I woke up with this Santa hat on. I'm Santa's helper, Phil. Perfect. Yeah, I love it. So powerful. Yeah, I think this is really clever. I also think that what's wonderful about it is that it engages your donors in a way that is playful but serious and allows them to kind of engage versus just like, oh yeah, I'll put that with my bills. Cause I think a lot of people do that with the mailers. They're just like, okay, it's another check I have to write. It's another credit card number I have to write down. And this takes, it seems like it changes the conversation. I always share a little case study that we all see the jars on the, by the cash register that certain places and stuff like that. They actually did a test. What they do is they just have a jar and some donations for this organization. And then they tested by putting two eyeballs, they'll do the eyeballs on it. And it instantly raised a lot more money. People start putting more money into it because we can't ask humans, we can't help but engage with things of eyeballs. And so my joke always has been that through my career, I put eyeballs on everything, always raises more money. So. And now an automated voice that when the change or goes in, it says, thank you. There's so much to do there. I love it. And we could certainly continue this conversation for such a long time, but I wanna make sure our viewers know where they can continue this conversation. John Lep, thank you. I am so appreciative. I feel better knowing that you and your team exist and are doing this great work around the globe. So check out Agents of Good. As he said, there is no brick and mortar. So they are in your community. They are in every community. And yeah, find a way to tell your story and describe your problem. That's what I learned. That's my big takeaway. It's not about telling the story, right? It's about addressing the problem and the why me, why now. So thank you. I love it. Hey, again, I'm Julia Patrick. I've been joined today by the nonprofit nerd herself, Jarrett Ransom. Hey, Jarrett, good luck on your disruptive party, out of the thing that you're gonna be doing. We're gonna have fun. Yeah, and just a little bit. Hey, we wanna thank all of our presenting sponsors. Again, without you, we would not have these amazing conversations that we do. John, this has been really fun. I've really enjoyed your comments and things that you've given us. You've put a twist on it. And I knew when Steven Shattuck started raving about you, that we had to get you on. So this is super, yeah, super cool, really, really neat. And I think that we are in the business of solving problems when we serve the nonprofit sector. And so this is one of those magical moments where we've learned a new strategy. And so thank you so much. Hey, we wanna mention to everybody, we're gonna be launching a new show, a second show, Fundraising Events TV.  So you'll be hearing more and more about that, but it's gonna be a show specifically dedicated to events from golf to gallows to everything in between. So you'll be hearing more about that. Check us out. Again, another great show, huh, Jared? Oh, it's fun, yeah. I can't wait to help my clients create mascot. So we'll be in touch. Excellent. I love it. Well, as we like to end every day, we wanna remind everyone to stay well, so you can do well. Thanks everybody, have a great day. We'll see you back here tomorrow.


Hello, everyone. Good morning. My name is Dane and I'm going to be talking today about creating a language learning platform for schools, for rural schools that are offline in South Africa. Now, before I talk about the actual platform and what we created, I've got a couple of quotes up here on the screen that you've probably been reading. These are from teachers talking about the experience that their learners have been having.  These came from one of the reports, which is that these teachers are not talking about the platform. They're not talking about the technology. They're not saying, this is incredible that you've created this platform. It's incredible that you brought it to our schools all the way out where we are without any internet connection. They're talking specifically about the experience that their learners are having. They're talking about the fun that their kids had, what they've learned. It's quite amazing that when you deliver something that really works, the platform becomes kind of invisible to the learners, to the users. And ultimately, all you have left is the experience of the people using it. And that's what we want to achieve. All right. My name is Dane Rossenrod. I'm the owner of a small website design and development agency and many other roles. And the business is called Touch Dreams. And I'm also a part-time web developer for the University of Cambridge, working on a bunch of websites in the mathematics department, specifically the MMP, the Millennium Maths Project. I've also been a Drupal developer for about 11 years now. And I've worked on about 180 websites. And about half of those have been Drupal. The other half have been a combination of a lot of different platforms, some Drupal, some WordPress, Shopify, a couple of JavaScript frameworks, and a couple of PHP custom apps as well. Now, before we get into it, I want to ask you all a couple of quick questions so that we can all get familiar with who's in the room. So three questions. First question, where do you work? So who here works in the websites industry, making websites for clients? That's about two-thirds of us. Who here works for an institution, an education institution, a government institution, something like that? All right, that's a couple of us, maybe a quarter of us. Who here works in something else that's not one of those first two groups? All right. So a small fraction of us. And question number two, who here has worked on a website or a web platform for schools specifically? Okay, one. Fantastic. And who here, this is the last question, the more fun one, who here has been to South Africa? Yeah, me and someone at the back. Fantastic. All right. So now let's talk about the situation. In South Africa, only about, sorry, 76% of grade four learners, these are aged nine to 10 years old, cannot read for understanding. And this is primarily in English. And this is because when the learners reach grade four, when they are about nine years old, they transition from learning all of their subjects, primarily in their home language, to learning entirely in English. So not only are they having struggling through the difficulty of learning these subjects, but they're now having to learn in their second or their third language. And what makes it even more difficult is that for many of them, English is not even spoken at home. It's not spoken by their parents. It's not spoken by their friends. They don't have exposure outside of the classroom to English. And yet all of a sudden they're learning all of their subjects in English. To put it into a little bit of context, I've got two short videos that highlight this quite nicely. We speak about learner centered education in South Africa, for example. And yet we insist on teaching children in a language they don't understand. If it's learner centered, you'd expect that the language of the child is the point of departure. Instead, it's the language, not even of the teacher, because most of the teachers are not even first language speakers of English. It's a foreign language. In black and white, it is written in a constitution that all the languages are equal. That is written. But practically it doesn't, it's not been done like that. It's the way that our mindset has been set up. That everything that is superior and everything that is pure must be done in English. That is a concept that our parents have. Textbooks are only in English and Africans, which forces a child who is doing Kosa to learn to learn that before he even understand the content, what is being taught there. He should first understand, try to understand what what is said. So the communication first before going to the content of the subject. When they mark papers, they don't consider that this child is Kosa speaking child papers are set on one standard. So it is very unfair and this disadvantage in our kids really. When it is a biology paper, the biology paper will only have only two languages, that is Africans and English. The Kosa is not there. Our kids are not passing the content subject as they will do if the questions were in their language. Some hear English only in your class. At home, nobody knows English and there are no TVs. You see, that's the problem. When you're talking to them in English, it's a foreign thing. The only kids who have mother tongue education from the cradle to the university are first language English speaking children and very many first language African speaking children, which means that those who were advantaged before the fall of apartheid are still the advantage after the fall of apartheid. Something I should add a bit of context here is that inside Africa, there are 12 official languages. The two most widely spoken languages, as you heard referenced in the videos, is Isik Kosa and Isizulu, but then there's Afrikaans, Swana, Sapelli, Suthu. English is only, I think, the sixth most spoken language in the country. And it's with that context that the amazing Oxford University Press decided to create a program, an initiative called Read to Learn, which I've been privileged to be working with them on for the last seven years as the primary web developer and web designer for part of that. So let's talk about what they're trying to achieve here, what they have achieved so far. And that is the goal of it is to create a web based platform that can deliver lessons and fun activities and assessments to these schools, many of which are offline. They don't have internet connection and they need to do it from a single server box, a box that the website lives on, which I'll show to you in a little bit. And this website needed to have various content types, needed to have various roles, categorizations of the content. So as you can probably imagine, Drupal was the perfect piece of software, perfect candidate for this particular need. This is an example of some of the interactive content that the OUP team have created. It's this beautiful illustration of a whole lot of, in this case, a whole lot of natural animals and plants in the natural environment. You can see a bunch of little sound icons as well. So the learners can click on that to hear what that word is in English and as they can start to learn it. And these are created as HTML5 mini sites or interactive activities. And as you can see, they're also created as a sort of slideshow. So one of these becomes part of what's essentially a slideshow, which we call a unit, which is like a lesson, a single lesson. And they only have a couple of slides. And what we've done is we've essentially embedded those within a single node. So this is a unit node in the Drupal site. And I'm going to show you what that looks like in a moment. But before I do, I just want to point out a couple of other things. So you'll of course see the sum of the standard things you'd expect in a site. You've got your menu up at the top and in the admin bar. And towards the bottom, you've also got two buttons. Currently they're grayed out. They're disabled. But when the learner gets through to the last slide of this particular unit, those buttons with a little bit of JavaScript become enabled and then they can play the game. Once they've played the game, they can take the quiz for the unit and then move on to the very next one. Now, let's see if I can open this up. So this is what one of the HTML5 units looks like. I'm just going to go ahead and click start. As you can see, there's quite a lot going on here. These are quite interactive. So you can, so the learners are able to, you know, click through to the various parts of the slide. They can play the audio introduction, which I'm not going to click on right now. And one other thing that's important here is there's words that are underlined. You'll see in the next slide there's a couple of more of them. And when the learners click on those underlined words, there's a pop-up which goes into much more detail about that specific word. So they can start learning about that dictionary word. I'll show you that in the next slide. The reason I can't show now is because I've opened this up in a new tab, it's not within the context of the Drupal site. So the JavaScript is not going to trigger if I click on it now. So these slides are quite interactive. As you can see, some great photography, lots of great information. And some of them are actually quite interactive. Like this is a little game that's within the actual units itself. So it's quite amazing what they've created. These were created with Adobe InDesign with a particular plugin called In5. And then they export them and then we just embed them within each unit as an iFrame. And that's it. That's the end of that particular little unit. There we go. Fantastic. So this is what the dialogues look like when they click on those dictionary words. As you can see, there's information in English for them to learn as well as in their home language. So they can see that the word itself and the definition of that word in English and in their home language and a little audio clip of somebody in their language speaking that word but in English. Nice and clearly. This is what it sounds like. Yeah. Currently, Read2Learn is in two and shortly we'll be in three languages. So Isizulu, Isikosa and one other. And so as we roll it out to more schools, more provinces, various provinces have primary languages that they're more widely spoken. So as we roll it out more, we'll add more languages to the project. But yeah, so for each learner, they'll have a language, their home language set on their user profile. Just gonna see if I can actually get this to play. It's not wanting to play. All right. Moving on. All right. So what we've done is we group these units into effectively curriculum. As you can see, the blue boxes are the ones that they're currently on. So these units are grouped in a couple of ways. So firstly terms, term one, two, three, four, they are grouped by subject. So this in particular, as you can see, natural sciences and technology, NST. They're also grouped by grade. So this is grade four, but Read2Learn spans three years, grade four, five and six. And they're also grouped by level. So you can't see it here, but each unit comes in two levels. Level one for the learners that need a bit more help from their teachers and level two, the learners that need a little less help, of course. And as they, how we've been able to keep track of the progress, we're using the flag module. There's obviously a lot of ways we could have done it, to link the units and keep track of progress. But we found that the flag module is kind of perfect because it allowed each learner to have to flag which units they had completed. And then the blue box would essentially move to the next unit. We also use the flag module for one other thing, which is if the learners fail the quiz at the end of their unit, they can, depending on their score, they might drop down from level two to level one. And also they have to redo that particular unit one more time. So we use the flag module to keep track of if they're in that redo process. And we also use the rules module to power that logic. If they get a high enough score, they can move up. If they get a too low score, they'll move down. So the rules provides that logic. And one of the thing you probably assumed is that all of the software that we needed, all the libraries, for instance, for the pop up and for anything else had to be saved locally. So no CDNs, nothing, no Google fonts or anything remote, all libraries that we use saved within the actual site so that it could be served offline. This is what one of the quizzes looks like. And this, we use the quiz module quite extensively here in the site. And this in particular is one of the questions. This is a multiple choice question, but quiz comes with a whole lot of different types of questions, which is really fantastic. And we use quite a lot of the other features of quiz. For instance, the submissions by the learners can be scored automatically or by the teachers. The quiz module comes with a bunch of reports and great views integration as well. So we use a whole lot of features of quiz. We rely on it quite heavily. So as I alluded to earlier, these schools struggle in many different ways. And one of the ways that they, one of the challenges that we have to overcome is that although some of these schools have computer rooms, they don't have internet, many of them. And these computer rooms that they do have many of the computers are sponsored by either the Education Department or by corporate partners and funders. And sometimes they are laptops, like you can see in this picture, sometimes their desktop, sometimes their Android tablets. But often there's not enough of them. These classrooms, sometimes there's 40, 50, 60 kids in a class and maybe 20 computers. And of the 20 that they have, a couple of them often don't work for whatever reason because they don't have an IT person on staff. So you'll often see two or three kids around a single computer all having to share and learn together. They also have a couple of other challenges. And a big one is that for many of these learners, they don't grow up with computers. Unlike many of the first language English learners in South Africa, like when I was in school, a lot of these kids, they don't have computers around at home when they're growing up. So the level of computer IT skills and literacy is relatively low. So they have to overcome that challenge before they can use Read2Learn to learn the language English that they can then use to learn the other subjects. That's a lot of hurdles. Now, this, quite excitingly, this is the little box that we were able to deliver. It's a fantastic little device created by a company called the Content Company. This is, I think generation number two. It's this little plastic box with the great bright Read2Learn logo at the top. And it is, has a couple of LED lights at the front, of course, to indicate status if it's connected, if the network is broadcasting, if it's got powered on and that kind of thing. And it's powered by Raspberry Pi, a single board computer. And it provides a LAN, a Wi-Fi network, that all of the computers in the computer room are able to connect to the box in order to serve that triple site to them. There's two other features which are quite impressive. So one is, as you would probably expect, it has a built-in battery. So you may have heard, but South Africa has a lot of rolling blackouts all the time. And so if there's a power cut halfway through a lesson, the battery lasts for half an hour, 45 minutes or so. So if the school is lucky enough to have laptops or tablets with some battery life, they could at least finish that lesson before the thing dies. And one of the really amazing feature in newer generations of this box, this is, I think generation two, but I'm not sure if this box had it, but the newer ones have a 3G connection, which is this, you know, say the other connection, it's not quite strong enough, well, it's not nearly strong enough to actually connect, you know, to for the use of the content. But what we do with it is, once a week, the actual Drupal site will take all the scores, the quiz results and compile them into CSV files, put them in a designated folder, and then the firmware on the box will go and take them out of that folder and send them, submit them via 3G to the OUP team, and then, you know, disconnect from the 3G. So it's just fast enough to be able to send those reports out and the progress for the OUP team to see how things are going. What's quite amazing to me is when I visited one of the schools with these, they take such good care of these boxes, the schools only get one, you know, if something happens to that box, they lose read to learn, and they love read to learn. So they take such good care of it, they, after each lesson they'll pack it back into the little cardboard box for packaging, they'll put it in the back of a cupboard and they'll lock that cupboard, they're so careful that it doesn't get stolen, doesn't get damaged, which is really great to see. As you can imagine, there are quite a lot of logistical challenges to delivering something like this. The big one, as you've probably guessed, is loading the content. So we're regularly taking these out to new schools in various provinces in various places, so we have to load all of that content onto those boxes. The earlier generations of the box we had to use, connect via the Wi-Fi and then use FTP to push the files to that box. And we'd have to do this every time that there was a new school, because you know, you've got new learners, new teachers, new classes. And then of course, the OEPT themselves are regularly creating new content. So we're loading that new content, new dictionary words, all of that kind of thing. And what's quite interesting, as maybe a lot of you have the same experience with me, we don't have a lot of experience with working offline, you know, with sites that are offline and with physical devices. Our sites don't normally live on physical devices, at least not ones that we think about, you know, they live in the cloud or in server boxes, servers, but not in boxes that you can actually touch. So it's quite interesting when these boxes would be created and delivered to me, at least initially, and I would load the site onto these boxes and test them, then send them across Cape Town to the other side to the OEP team for them to test them and come up with all kinds of backup plans, which I'll get to in a minute, and then ship those boxes out to those schools by plane, by car, out into these rural areas. Another thing that was quite interesting, and we learned very quickly, was troubleshooting, when you can't actually connect to the site, when it is offline entirely, is quite a challenge. We, of course, we had to preempt as much as we possibly could. So we're always trying to think of what could possibly go wrong, way more than any other site I've ever worked on. And even when that was the case, we'd also have to plan for, OK, if something does go wrong, how can we solve it offline? There were many times that I'd find myself on the phone with somebody out in the school somewhere in the middle of nowhere, sitting in front of this box and this IT technician, and I had to point them through, OK, with this administrative account that I've given them, click on here, click here. Let's try and find the source of the problem and then find a workaround in the field for that problem. Maybe if it's a permissions problem, then allows change the permissions or change the certain access levels of units to work around that problem until we can get that box back and sort it out in a more feasible way. Also, the updating process was a really big challenge that we're still tackling. And I don't mean small updates like fixes. I mean on a sort of annual basis or a half year basis where because the OUP team is always creating new content, but also these learners, obviously every year they're going up a grade. They're changing their classes, they're changing their teachers, all that kind of thing. And we need to load the new content. And in many cases, we weren't actually able to get the boxes back. So the boxes would stay out in the field and we'd have to essentially deliver the site to them. But we didn't just want to overwrite the entire site. Mostly we wanted to just load the week we were able to load the new site. But we needed to save some of the data, in particular the quiz results and the progress of the learners. So what we were able to be decided to do was write a bit of firmware, some process is a bash script in particular that would export some of the database tables, particularly the ones that related to the quiz module and store those, then take the whole site either, you know, the IT people would put the site onto the computer via file FTP or on newer versions via a USB stick. It would replace the site and then it would re-import those database tables again. And of course, if there, you know, any schema changes needed to be made to those database tables, it would need to do that too. So the whole process of doing updates in the field was, you know, it's still an evolving problem. We're still figuring out the best way to do it as we change the boxes, as we change the schools and as this scales out because it's going to more and more schools in more and more situations. I'm going to show you a couple of quick pictures from one of the schools that I was fortunate enough to go to. This is Silo Canyo. They are in Cape Town, but in one of the lowest income areas in Cape Town. This is the entrance to the school, as you can see, just next to the entrance, they've got this beautiful little garden that they were starting to grow next to the car park between the car park and the school. This is, I apologize for the lights. I don't know if we can, I don't think there's any way to drop it down. So we'll have to just, I hope you can see it clearly enough. This is one of the corridors of one of the school classes. This is grade R, but it's essentially, you know, grade zero. It's before they get started with grade one.  I can't actually tell what age this is. This is really younger. This is a primary school. And this is another picture, more of the girls in the assembly. And last picture, this is the teachers, the teachers that work so incredibly hard to make it happen. It's really great to see when they're smiling, enjoying themselves. I'm assuming this is a learning and curriculum day for them. So over the last couple of years, while we've been rolling, while we've been building Read to Learn, we've been able to roll it out in many different trial programs. And one of the biggest ones was last year in the Eastern Cape. So this is one of the provinces, I think the province with the lowest sort of level of earning of any of the provinces in South Africa. So they faced a lot of challenges. And this was a really a keystone sort of trial for us. In this particular one, Read to Learn, we took it to five schools. I think all of them, or possibly four out of the five didn't have any internet connection. There were 25 teachers involved, 1,165 learners. And at its peak, the most busy month, we had 485 learners using the site. Currently, Read to Learn is in many more schools. We've rolled it out across the Western Cape and the Eastern Cape. And it's in 16 different schools, or at least 16 schools that have used it. Many of them are still. 108 classes of learners, 241 teachers have been using it, and 4,382 learners have been involved learning from Read to Learn. And the OUP team have created 541 interactive units. That's a heck of a lot of pretty amazing learning content. And that's not including the quizzes, the games, which are also all interactive and needed to be created. So I'm gonna wrap it up with a couple of takeaways. The first thing is that this is an incredibly complex problem. There's no one solution. There's no single bullet to this. It needs many different initiatives from many different organizations to solve this. And South Africa is very much still tackling this. From the OUP team, it required a lot. Officially, it required a lot of understanding and empathy for what these teachers and these learners are going through. And they needed to discover what the problem actually looked like for the learners in their actual context and what the situation in the schools was. What is the teaching environment? What does it look like and what are the challenges that they're facing? And there's something that I alluded to right at the beginning. You've probably realized, as I've been explaining it, that the site itself isn't really revolutionary. And although those boxes that we put the site on are pretty amazing, they're also not really revolutionary. And it's much more, the solution reach learners much more about the logistics and the delivery of the technology and making sure that it works consistently. And then the end of the day, for the teachers and the learners, when you do it really well, they don't notice the technology. They don't realize how tough it was to deliver it to them. What they see is their experience. And I just wanna add to it that it required a lot of skills to make this happen. So there were curriculum specialists. There were interactive designers and artists who created those games and those quizzes. Web designers, web developers and a whole lot of other professionals involved. And yeah, it was really about just creating something and making sure that it worked and persisting through all of those problems to deliver something that the learners could really benefit from. And that is how we created Read2Learn. Now, before I get to questions, I'm just gonna do one or two quick announcements. Firstly, you probably have seen the slide many times before. This is about the contribution days happening every day, but in particular the big one tomorrow. And this is some of the times and I'm sure that information is all over, including on the app. Next one, apparently there's gonna be a Drupalcon-wide survey. It's gonna be sent by email. So remember to fill that in. And then also in the app that you can actually rate or not rate, you can answer some questions about each particular talk. So that's in one of the things called session surveys. So please be sure to fill that in. And one other announcement, which, wait, why is this not loading? No. This last slide was supposed to show my team. I had a whole lot of pictures of my team. Wait, hang on, let me see if I can just show it. It's not a big deal if we can't, but it'd be really nice to, there it is. Okay, I'll see it, I'll click slide show. Oh, this is, I don't know why it is, oh, internet problems. Anyway, I just wanted to point out that my team is growing. So you can't really see the pictures here, so I'm just gonna talk through it. But we currently have this four of us, a girl named Gamal, Amy, Susan, me, and then we have two more people joining our team very shortly next month, Imran and Claire, and then also an intern, starting very soon. So it's really exciting that we're growing. Anyway, that's it from me. Let's go back to questions. Oh, they've got a roving microphone. Oh, in the middle, okay, cool. So let me just run like that. First, thank you. I had a question about your choice, but the device you used, that's it for the website, or so maybe, I think you used maybe manifest and some offline tools for the website itself. But have you seen progressive web apps? Maybe for the, so the box will not contain maybe a website or connection to the game, but the game itself will contain all the questions and let's say all the behavior for the game itself. It's a bit technical, I don't know if you're... I'm not sure if I understand what you're asking. Are you saying we should we create them as HTML5 apps and games? Yeah, absolutely. So offline web apps, so you will export like a static version of the game that will be installed on every computer. Yes, so it's a really good question. Progressive web apps, will you effectively load it once and then you can use it offline? But from my understanding of progressive web apps, you kind of first have to be able to connect to the internet to fetch it for the first time before you can use it offline. So they would need to be able to... Actually, you could... Yeah, you will need at least to install it once. That is true as well. At least to contain all the assets and you have to think about how to use the local storage. But it was a question, Mo, it's not like you can do it. It was a question if you... Have explored it. Yeah, you have seen this solution as well. Yeah, perhaps there's something we could look into. I think part of it is just the creation process. So I don't have anything to do with the creation of the interactive interactivities. And the team has found that Adobe InDesign just works really well for them to create those. So I guess it's a question of, if they're really creating them in Adobe InDesign with those plugins, how can they export them out of that program? What formats could they export them in? And could Adobe, when they're creating them in that, could it export them as progressive web apps? I don't know. But for the site itself, potentially, yes. I think, sorry, I take one second more. Because I think in terms of certain technical, maybe shortfall or hitcap that you have, maybe the central device is very clever because you can have a Drupal website where the games can communicate to, maybe, if they are communicating to this device. But at the same time, having the application installed, once it's on the computer, all the assets, videos, images, and you use all local files or local storage to have all your questions or the per course of the player, you will have no real use of, let's say, to repair anything because it will be installed once. What you need is to have a connection from time to time to update the state of the game if you have a new question or something like this. Yeah, yeah. They could certainly be web apps like that on those devices and then connect occasionally. I don't know what the limitation would be, how much connection we'd need to have and how often they would need to connect for that to work and what kind of information they would need to pass from those computers. So I don't know. Perhaps that's something we can look into. Thank you. Does anyone have any other questions? Oh, you do. So first of all, thanks again. This was really inspiring, but I have a couple of questions. One is more general, I was just curious whether you had any feedback from the teachers. I mean, I guess it was largely positive, given what you shared about the care with which they're handling the boxes, but I was wondering whether you have some measure, some concrete data about how effective this tool is being and the other question was more technical but I'm not sure whether you want to reply to the first one first. The OUP team certainly do. They have some metrics, some statistics, some that they weren't able to give to me. I have seen some of the reports and most of what I've seen have been the quotes. So I've seen the report that they were able to give. We were a lot of quotes from the teachers on their feedback and I'll see if I can go back to that in the first slide. So I don't actually have any of the stats to give, unfortunately. I'm not employed by OUP. I just work with them and let's see if we can bring it back. Oh, I unplugged this already, so that's not going to work. But I only have the quotes that you saw on the first slide and a lot more quotes. Okay, because I missed the very beginning of the presentation. I'll plug it in in the meantime. Do you want to ask your second question? Yeah, the other question was RT's small HTML sites that make the units exported in a particular standard. I heard about H5P. Yes, so interestingly, H5P, we used to use H5P. When Read2Learn started, that was actually how we created all of the games and the quizzes and that kind of thing. We did them all in H5P and we moved away from it. I think it wasn't my choice. It was more H5P is still fantastic. It allows you to build these interactive games in the actual site. They were building them in Drupal. I think they moved away from it primarily because they just found that they could do more with the Adobe InDesign with the plugins that came with it. But yeah, H5P is fantastic. I don't know the specific reasons why we moved away from it, but yeah, it was definitely a good solution at the start. Yeah, thanks. Yes. Thank you, Dan, very inspiring. One question was, I think what the previous person was mentioning, just trending-wise, since it's been going for seven years, if you are doing a lessons-learned or learning and best practices, so I think that's going. The second thing was, did I hear, how is this getting funded? Is this something, collaboration with schools? Yes, that's a really good question. I don't know how much I am allowed to say, and I also don't know the bigger picture, but I can say what I do know. I can say something. So the education departments in South Africa, there's various education departments in each province as their own, and the education departments are very keen to roll it out in their provinces, but that's just one mode. Schools are definitely able to buy it themselves and roll it out, so we do have a couple of schools that do have a bit more money and they're actually looking to buy it themselves, so it is something that they sell to the schools that can afford it and to the education departments, and sometimes I think there are some partners, backers that also provide it, but for the most part it's the education departments and then some schools. Something I didn't really talk about in this is there's also an online version of Read to Learn, so not all of the schools are offline. Most of them are the ones that we've built this for, but some of them are, so there is a primary Read to Learn online one that you can look at, but if you go to it now, you'll just see the login page, and so we're syncing that up with the offline one, so there is always an online one for those schools that are using it. Great, thank you. Sure. Maybe a more technical question. I heard you use the quiz model. We have been using it too, but when we had to upgrade to Drupal 10, it didn't really exist. Yes. So what is your plan to upgrade or not? Maybe it's not necessarily the upgrade so fast. That is such a good question. The quiz module in Drupal 10, it is, even in Drupal 9, it was with patchy. There were some bugs. We needed to use it. We had to upgrade to Drupal 9, obviously a couple of months ago, and we did, and we looked at the various issues that the quiz module had. A couple of bugs. Some of them we could work around. One or two that we had to patch. And in Drupal 10, it's also not entirely ready for Drupal 10. There are a couple of breaking bugs. We do have to upgrade it to Drupal 10 very, very, very soon. So we are currently trying to figure out what is our way forward. It's literally a discussion that we're having last week and the week before. We rely on it so heavily that we're gonna have to, I think, work through those problems. Patch it where we have to patch it, work with the maintainers. And I mean, we're a very small team. It's me and my little team, and so we'll do what we can. So you're hoping for contributors tomorrow. Yeah, exactly. We didn't have the time to wait. We had to start quite early changing. So we didn't need everything from quiz module. We didn't need keeping scores and so on. It is not locked in part. So we went with forms plus the quiz thingy that went with it. Forms plus the quiz. We'll consider that, yeah. It's such a critical question. We do use the results and the scoring and all that. So if we went another route, like using forms or webforms or anything else. You don't have to create that part, too. Yeah, we'd have to do a lot of extra functionality we'd have to add to replace the stuff that quiz comes with. Did you say webform or contact form or a different one? Webform. Okay. Okay, yeah, so you're saving. And for scoring? The scoring of like when somebody fills in the quiz? So it's a module that is on top of webforms. So everything that is in webforms you can use. They have a different question part. So you have to use their questions and it's multiple choice. Single choice was it? And I think we added multiple choice because we needed that. And for scoring you have the basics that you can say, okay, that is true and the other ones are false. And you can give feedback on that. You have a scoring page where they say that was wrong, that is right. That's built in. We added some extra things to have the things that we needed for all parts. But yeah, it's just a simple module and you can enhance it if you need more than that. That's fantastic. Is it a contract module now? Or will it be? The base part is a contract module. So it's Drupal 10 ready, that's what we needed. Fantastic. And it's just an extra question type on top of the webforms. So if you use webforms in your site, it's just an extra question that you have and a page that you can add for the results. Okay, fantastic, we'll look at that. Thank you. Yeah. Well done for creating that. Oh, and maybe before there was somebody who would set the offline version that you can download. We also have something with languages and if you have more than one gig on files like video files, you cannot do that right. Then you have to go another route and I think then this one is better. Exactly, it becomes quite tricky then. Hi. Great talk, great initiative. Just wondering, are there any long-term plans for the future? Like rolling out to different countries, different languages? I haven't heard any talk about other countries. I think it's specifically a South African initiative. It's about the Read to Learn team in South Africa. Other languages definitely though. So currently, as I said, I think it's, we've got it in two languages and we're working on a third and as more education departments buy in and some of them are very, very keen and then it's just a question of funding and time frames and a lot of logistical questions. We'll definitely be adding more languages. I imagine that the Read to Learn, the OUP team would be willing to work with other organizations to create something similar for other countries, but that would be a corporate discussion I guess because it is a product of theirs essentially. Is there anyone correlating the test results for the standardized tests with the districts that have these tools? That is such a good question. I don't know the answer to that. I'm pretty sure they are because that's critical. They need to show the success of it. They need to show the actual, as you said, matching what we're delivering with the outcomes and any changes in the outcomes based on what we've created. And so I'm pretty sure they are doing exactly that. I wouldn't be privy to the, unless they wanted to share those stats with me, but I'm sure they are doing that. I'm mostly just involved in the delivery of the platform, but yeah, it's obviously, it's a critical question that they're answering. And learning like this supports other types of improvement. I mean, the love to learn to read, the love to be at school, there's so many more reasons other than peer test scores that go into something like this. So it's not, but that is what secures the funding. Yeah, exactly. As you heard one of the teachers say in one of those videos, it's languages in South Africa, it's a really big deal. It goes back into cultures and history and apartheid in particular, unfortunately. And so as it is way more than just about schooling, it's about them connecting with the wider commerce world, the wider world and what it means to them, how they feel about English and how they use it with their friends and everything as they grow up. As they go to university and they get to the big universities and they're expected to do everything in English as well. It has so much more impact, as you said, than just their school results. So it is really critical. And I'm really happy that they've done this initiative and I've been involved with it. Anyway, I think we'll stop there. Thank you everyone.


Hello everyone and welcome to the session. This is Professor Fahad and this session I'm going to look at a foreign currency per option under the IFRS 9. I'm going to work the cash flow hedge in detail then go over the fair value hedge very briefly. This topic is covered in international accounting the CPA exam as well the ACCA exam. As always I would like to remind you if you have not connected with me to connect with me only then YouTube is where you would need to subscribe. I have 1500 plus accounting, auditing and tax lectures. If you have not subscribed please subscribe. If you subscribe please like my videos it's very important it helped me substantially. If you like my videos please share them put them in the playlist if they're benefiting you it means they might benefit other people share the wealth it's free. Also I have an Instagram account I'm trying to grow my Instagram account as well as Facebook and this is my website. If you are studying for your CPA exam I strongly suggest you check out studypal.co it's an artificial intelligence study body platform that match you with CPA, CFA, whatever exam you are working for. Studypal has users in 85 countries in 2800 cities and here's the link if you're interested in checking it out. Now in this session we're going to talk about options specifically we're going to talk about put options. Now before we proceed I just want to let you know I have two links in the description below so in the description below I have two links and those two links are for a forward contract foreign currency forward contract so it's very important that you understand how forward contract work and I have a cash flow hedge example cash flow hedge and I have I explain a fair value hedge. I'm going to be using the same example to illustrate how options work so in the prior session I went over cash flow hedge as well as fair value hedge when it comes to forward contract. Now an alternative option for companies an alternative option and that's not the only alternative option but this is one of the alternative option to forward contract is something called a put option or a call option so this is what we're going to be discussing in this session but it's very important to understand how does an option work and specifically we're going to be covering put option in this example but I'm going to explain both the put as well as the call option how does it work in general so what is the put and what's the call option and how do they differ how do they differ from the forward contract well under the forward contract you basically have an obligation to buy or sell that currency so you don't have an option basically if you remember we said we're going to sell the currency at dollar 48 basically we are in a sense stuck let's put it let's let's let me let me put stuck in quote you are stuck you have the obligation to sell it at 148 well the put option is a little bit different the put option said you have the right but not but not the obligation it means if you want to sell it you can sell it at dollar 48 but if the price is dollar 55 if the price is dollar 55 guess what why would you sell it at dollar 48 you let your option expire and you sell your currency at dollar 55 so that's what an option is it doesn't you're not stuck okay this is if you are selling if you are buying if you want to buy something let's assume you want to buy something for you want to buy a foreign currency at a rate of three dollars okay then and you pay the premium to have that right then the price of that currency dropped to 250 you can buy it for 250 well guess what you you have the option to buy it at three you option that if it's at 250 i'm gonna let my option expire and i'll buy it at 250 assuming it's it's worth it it's it's it's it at 250 it covers my premium and we'll talk about the premium in a moment the premium is what you have to pay to have that option so the option is more flexible so you can you can you can go ahead and exercise your option or if you don't think it's a good idea to exercise your option if you think it's a good idea to buy or sell the current currency at the spot rate you will go ahead and sell it at the spot rate the forward contract you can do that once you once you sign for it you have to deliver at that rate so we're gonna explain this in an example so let's go back and review our example from the beginning the one that we used for the forward contract we have x ximo co-shipped goods to a Spanish customer with a payment to be received on March 1st assume that the spot rate for euros is dollar 50 but December 31st the euro appreciated the dollar 51 so here's the deal we sold 1 million worth of euros the rate is dollar 50 on the date of the sale so when we record the sale we record it at the spot rate that's always the case so at the spot rate we have 1.5 million in receivable 1.5 million in sales 1231 the euro is dollar 51 well guess what we're going to have more receivable we increase the receivable 10 000 and we have a gain of 10 000 so we adjust adjust to the spot rate we adjust the receivable to the spot rate okay now March 1st the exchange rate is dollar 48 well when we receive the foreign currency we have basically the foreign currency went from dollar 51 to dollar 48 not good so we experience a $30 000 loss on the foreign currency because it went down by three pennies times a million that's a $30 000 loss so we write down the receivable and we book a loss then we receive the cash we receive the cash we received 1.1 million 480 but once we exchange it we receive the euro we exchange it to dollar and we reduce our receivable we remove the receivable so this is when we have no protection no forward and no option i looked at forward contract before i worked the fair value at as well as the fair value as well as the cash flow hedge now we're gonna be looking at an option now we're gonna buy an option to protect our position to protect what is our position what is our exposure we have a million euros we're pending a million euros we're waiting to receive a million euros so let's take a look at this assume on December 31st we bought the the company bought an over-the-counter put option from the bank with the strike price of dollar 50 when the spot rate is dollar 50 and pay a premium of 0.00 per euro simply put here's what they did they went to the bank or actually not to the bank over the counter just basically they bought it somewhere on the market from somewhere on the market from another from another party and what they did they said well the strike price is dollar 50 therefore they can they can sell they can sell their euros at dollar 50 so now they kind of guarantee that price but to guarantee that price they have to pay 0.009 per contract that this doesn't come cheap why because somebody is buying selling you this option well you have to pay ten thousand nine thousand dollar for it okay but you are guaranteed you'll be able to sell your euros at dollar 50 so when you get the euros when you get the million dollar euro you can sell them at dollar 50 you are guaranteed one million five hundred thousand but remember you had to pay nine thousand dollar to have this option so copy this number down one million four hundred ninety one thousand this is your guaranteed amount at least or at least let's put it this way this is the least amount you would receive from the one million euros that's it you locked your price okay you locked your price why because this option this put option they said you can sell the euro at dollar 50 okay you can sell the euro at dollar 50 it means once you receive your euros you could always sell it at dollar 50 but you have to pay upfront nine thousand dollars so there's a cost for the for the for the euro now keep in mind this this option has no intrinsic value why it does have no intrinsic value because the spot rate is dollar 50 and the strike price is dollar 50 therefore you have no you have no gain if you exercise this option today therefore there's no intrinsic value well remember the option has two pieces intrinsic value and time value yes there is a time value the time value is the time from december first and remember the payment it's going to be made march first so from here to here from here to here if the price drops then you'll be good this put this put option is good so what you're doing is you're protecting yourself so what you're saying is your fear is the price is gonna drop to dollar 40 okay and if it drops to dollar 40 you have a million euros you would receive if you're not protected 1.4 million but also the price of the euro could go up to dollar 60 well in that case you're gonna let the option expired and exercise your euros at dollar 60 and receive 1.6 million okay so we don't know what's gonna happen but you know you you are guaranteed at least 1 million 491 so if it drops to dollar 40 on the on march first you can sell it at dollar 50 if it goes up to dollar 60 you will you would let your you would let your option expire you will throw it in the garbage and you will exercise at the market price okay so you are guaranteed at least as i said you're guaranteed at least 1 million 491 thousand 1 million 491 thousand okay all right sorry about that let's go back here okay just trying to clear my screen there we go okay so there is there is only time value in this option and it has more value as the as the as the price drops below below dollar 50 okay so if the if the stock price in three months is greater than the strike price of dollar 50 then you will not exercise as i said if it's a dollar 60 you let it expire by purchasing this option you are guaranteed a minimum cash flow of 1 million 900 1 million 491 thousand i already told you this okay and remember there's no limit to the maximum number of us dollar you could receive if if the price went up to two dollars and guess what you would receive a million times two dollar two million okay so you don't have to exercise at dollar 50 you just have the option to exercise the option to exercise so foreign currency options are derivatives therefore they must be reported on the balance sheet at fair value okay so the fair value of the foreign currency option at the balance sheet is determined by referencing the premium quoted by banks on that date for an option with similar expiration date now here they use the black shawl method we don't have to worry about how they come up with that market value of the option so the option by itself has a market value okay the option by itself has a market value that's the hedge that's the hedged instrument the hedged is the account receivable you're hedging your account receivable with an option okay so the change in value of for the euro account receivable and the foreign currency are summarized below so what i suggest you do if you don't have the powerpoint slides you know take those numbers down because when i when i'm working the journal entries i cannot keep referencing back and forth to this okay so on december 1st the spot rate is dollar 50 you have 1.5 million receivable in us dollar at this at this rate the premium you paid 0.009 therefore basically your option is worth the day nine thousand dollars it's all it all has to do with time so it has a nine thousand dollar time value on december 31st the the the rate went up the dollar 51 therefore your receivable went up your receivable went up by 10 000 the up the premium went down notice it was 0.009 it went down to 0.006 so simply put you lost 0.003 okay as time expired well this is basically time expiration of the option okay and also remember the the why did it go down to in addition to time expiration remember the the euro versus the dollar now dollar 51 that's against what you want against your protection your protection is going down and the rate went up it didn't really help you okay but by march 1st the rate went down to dollar 48 now you are happy now your your option is worth more okay now your receivable is worth 1 million 480 your receivable went down went well from dollar 51 to dollar 48 there's a 30 000 dollar change but your premium went up because you are protected remember you can sell it at dollar 50 and the rate is dollar 48 therefore you you are protected you you are in good shape so the premium the premium went up from 0.06 to 0.002 which is you have a fair value now the premium has a fair value of 20 000 it changed 16 000 the change in the fair value of the premium okay so let's take a look at the journal entries and see how we how we record those transactions again we're going I'm going to be referencing to this table but let's look at the journal entries assuming this is a cash flow hedge so we're going to look at a cash flow hedge rather than a fair value hedge we'll we'll talk about the fair value hedge toward the end okay so what I suggest you do right from the front use the accounts to keep track of all the accounts because we're going to have many accounts we're going to be dealing with so the best way to look at this is to keep track keep track of them okay let's take a look at the first entry the first entry will be debit account receivable credit sales and this is the sell I'm sorry not the sell to record the sale at the spot rate that's the first thing we have to do then what else do we have to do we bought the we bought the option now we're going to have an asset called foreign currency option this is an asset basically this is an asset it's basically an investment and we credit cash and this is to record the purchase of the foreign currency option as an asset at its fair value of 9 000 why 9 000 because they told us the fair value is 9 000 because the strike price and the spot price were the same dollar 50 dollar 50 the spot as well as the strike and you paid 9 000 it's worth 9 000 okay that's basically it okay now let's take a look at December 31st remember what happened December 31st now we're dealing with a rate of dollar 51 dollar 51 your account receivable will go up and you have a foreign currency gain why do you have a foreign currency gain because you have a receivable and the and you're in the exchange rate for your receivable went up so this is to adjust your account receivable at a spot rate of dollar 51 now remember if you have a if you have a gain of dollar 10 000 dollar you're gonna have to record a corresponding loss so there's the hedged instrument the hedged instrument the receivable i'm sorry the hedged item the receivable this is the item and the instrument they work the same way the the work exact the opposite way not the same way so if you had the gain on the hedged item you're gonna have a loss on the on the exact the exact loss on the on the instrument so you're gonna debit loss on foreign currency option notice you had a gain of 10 000 you have to record a corresponding loss and we're gonna you're gonna credit accumulated other comprehensive income 10 000 so notice those two on the income statement the net effect zero they can't solve each other out and this is the purpose of the hedge is to whatever gain you have on the option you would lose it on the hedged item whatever you gain you have on the hedged item you would lose it in the option okay then you will have this you will credit accumulated other comprehensive income and i suggest you keep track of this account a a oci now you have in the year 10 000 dollar okay we're not done yet we have to remember we have to reduce the option from 9 000 to 6 000 why do we have to reduce it from 9 000 to 6 000 because the the value of the option was 0.009 by December 33rd was 0.006 it went down 0.003 therefore we're we're gonna record this debit other comprehensive income and credit foreign currency option now we're gonna be reducing the foreign currency option by 3 000 it's that the asset okay we're gonna be reducing it by 3 000 and this is to reflect also the change in the option that the option was worth only 6 000 therefore we reduce we reduce it by 3000 it was 9 now it's down to 6 okay now we have to expense we have to expense time value so we're gonna we're gonna debit option expense 3000 this is for the time value of the option this is for the change in the time value of the option okay so we're gonna assume that that that's three pennies because time has passed okay now notice here that you debited OCI let me highlight it in a different color you debited OCI you credited OCI basically what you're left with is you expense 3 000 of the stock option and you credited foreign currency option of 3 000 so this is basically what it boils what it boils down to so you reduced an asset and you you increased an expense basically that 9 000 that we paid 3 000 of it is expense it's expired because time went by time went by so let's take a look at year one effect year one we recorded sale of 1.5 million we recorded foreign exchange gain under receivable we record the foreign exchange loss on the currency option therefore the effect is zero the only thing that goes in addition to the 1.5 million is the expensing reducing the option by 3 000 because time has passed time value on the balance sheet here's here's the effect we reduced cash by 9 000 this is obviously just showing you the change the counter receivable is up by 1 million 510 you have a foreign currency option it was 9 000 when you started with then you reduced it by 3 now it has a 6 000 value retained earning is 1 million 497 which is net income and you have an AOCI of 10 000 dollar 10 000 so those are the effect now we're going to look at the transaction what happened on march 1st on march 1st remember in this example we are assuming that it's dollar 48 now before we proceed i'm gonna stop right here and tell you something after i'm done with this dollar 48 i'm gonna use another another price another spot rate for march 1st so on march 1st year 2 the option has increased in value by 14 000 time value decreased by 6 000 and intrinsic value increased so the intrinsic value increased by 1 000 elder the time value is gone because by march 1st the time value is gone but the intrinsic value increased why because the spot rate was dollar 48 now once i'm done with this spot rate dollar 48 i'm gonna change the spot rate to something above the strike price and once i do so i will start the entries like here march 1st so December 31st entry will not will not be any different okay but now we're gonna assume that the strike the spot rate on march 1st is dollar 48 what it means good for us in what sense it's good it's not really good good but it's good in a sense that we are protected it's dollar 48 but we can sell our currency at dollar 50 so compared to other people we did good because we protected ourselves so the first thing we have to do is adjust our receivable so we reduce our receivable and we record the loss okay we reduce our receivable then we record the loss then remember when we have when we have a loss on the receivable we have a gain on the corresponding on the corresponding hedging instrument therefore if we have a loss here we're going to have a gain here exact opposite therefore we debit accumulated other comprehensive income we credit gain on foreign currency option this is to record the gain on the foreign currency option to offset the foreign exchange gain on the account receivable with the corresponding debit to AOC I accumulated other comprehensive income remember whatever happened to the receivable if it if it if it went up the option will go down if receivable went down the option will go up that's the purpose of the whole hedging the purpose of the whole hedging position that's the purpose of it now what else do we have to do foreign currency option we're gonna increase foreign currency option we're gonna increase the asset by 14 000 why do we increase the asset by 14 000 it was 6 now we add 14 it's equal to 20 000 why did it go up because the the foreign currency went down as the foreign currency went down our option is worth more because we are protected at dollar 50 and it's dollar 48 okay so now the foreign currency option is 20 000 therefore we debit foreign currency option we credit other accumulated other other accumulated other comprehensive income we're not done yet we have many more entries to go through then we're gonna expense the option that's that's left we're gonna expense the option that's left we're gonna debit up we're gonna debit option expense okay why do we debit the option expense because that's the time value remember we had a six thousand dollar time value we have to expense the time value of it because then we're gonna debit foreign currency because we received the foreign currency and we credit the receivable we received the foreign currency 1 million 480 because we received 1 million euros 1 million at a rate of dollar 48 at a rate of dollar 48 then we're gonna convert everything we're gonna debit cash 1.5 million because we can we can convert this 1 million euros at 1.5 at 1.5 therefore we're gonna get 1.5 million we're gonna credit the foreign currency receive we're gonna credit the foreign currency we're gonna give up 1.4 million and credit foreign currency option of 20 000 basically on this transaction specifically we made 20 000 but that's not done at our net gain so let's see what happened overall for the whole for the whole transaction hopefully you were keeping track of things here's what happened in year two you had a foreign foreign exchange loss a foreign exchange gain that cancelled each other out then you expense the remaining option of 6 000 the time value of money therefore the impact on their income is negative six negative six thousand that's the that's the that's the effect on year year one so negative six thousand no this negative six thousand year one year two let's go back to year one and show you how much was year one was and the net effect on year one was the losses were 3 000 so 3 plus 6 equal to 9 okay and remember remember what i told you the maximum you would receive is 1.991 000 so let's see so over two accounting period we reported a sale of 1.5 million an accumulative option expense of 9 000 we expense 3 000 year one we expense 6 000 in year two that's the 6 000 and the year one was 3 000 then at the fact on the balance sheet is an increase of 1.491 000 with the corresponding retained earnings of 1.491 000 you remember what i told you from the get go the minimum we would receive is this much and we did receive the minimum we could receive more we're gonna see that's possible we could receive more but the point is we will not receive less than 1.491 000 okay the net benefit from acquiring this option is 11 000 why the net benefit is 11 000 if we were not protected we would have received 1.480 if we had no protection because we had protection we received 1.491 therefore the net benefit is 11 000 we received 11 000 more than if we did not have any protection which is good so the gain is reflected in net income okay as the net change on foreign currency less cumulative option expense so we have 20 000 on the currency we did good on the currency but we had to pay 9 000 so we did good on the selecting our investment so we had again on the foreign currency option but the cost of the foreign currency option was 9 so 20 minus 9 equal to 11 so we made 11 000 we are better off 11 000 over two accounting period by having this option so let's assume now remember i told you i'm gonna change the spot rate let's assume the spot rate on march first was dollar 0.505 what does that mean it means it's more than 0.5 it's 0.05 so why would i convert at 1.5 so would i convert at 1.5 or would i convert at 1.05 obviously i'm gonna let my option expire and i'm gonna convert at this at this at this at this rate and as a result if you can think about it i'm making 0.005 more times a million i'm gonna be making an additional five thousand dollar okay why because i'm gonna let the option expire let's let's take a look at it so December 31st entries will be the same now we're gonna be changing the example now we're gonna have to adjust the receivable the receivable is adjusted it was point 1.51 December 31st now it's 1.505 so the receivable went down by 5000 we're gonna reduce the receivable don't worry we're gonna we're gonna book a corresponding gain so notice we have a loss on the receivable okay because the it went down from 1.51 to 1.50 you're comparing it to December 31st then you're gonna get root of the option so the time value of the option you're gonna credit foreign currency option debit a loss for 6000 this is to record the to record the time value the time value of the option expired that's it's gone goes down to zero now we're gonna debit accumulate another comprehensive income and credit gain on for gain on foreign currency option so notice you have a loss here you have a gain here okay now then you're gonna go ahead and reverse this entry and transfer the gain to net income at the end of the period but the point is for every loss you have a gain okay so to offset the loss this entry should be here but that's okay then we're gonna receive foreign currency we're gonna be receiving 1,505,000 why because we're gonna we're gonna convert the currency at 1.505 then we're gonna take the currency and convert it to cash at 1,505,000 and we're gonna remove the foreign currency give them the foreign currency and they will give us us dollar so notice what happened here is we received an additional five thousand dollars so we received 1,491 plus an additional five thousand dollars and you will see this in a moment so now at the end of the period we we debit this account and we remove we move the five thousand to that income so because the transaction has settled so here's what happened that income related to this hedge transaction is 1,496 the sale is 1.5 million we paid 9,040 option then we made a five thousand dollar because we let the option expired and we exercise at a higher than dollar 50 we because we were guaranteed 1,491 but if the price is higher than dollar 50 we're gonna get more this is how the put option work let's assume this option was designated as a fair value hedge what will be the differences the gain and the loss would be directly going to that income remember we don't go through the OCI no separate recognition for the change in the time value of the option so that three thousand and six thousand that we removed we don't account for that the net gain recognize in year one and year two would be different from the amount recognized under the cash flow but over a two-year period it will be the same so the way we compute the gain the income from year one to year two it might be different between the fair value fair value hedge and the cash flow hedge but over a two-year period they will be the same okay so the accounting method has no impact on cash flow or net income recognized overall so at the end of the day the cash flow and the net income is the same just how much you record it in year one versus year two under the cash flow hedge versus the versus the fair value hedge if you have any questions any comments about this recording please email me and the next recording I will maybe maybe work a purchase commitment explain purchase commitment foreign currency when we have a purchase commitment and if you have any questions email me if you're studying for your CPA or ACCA study hard these these topics are covered and if you happen to visit my website please consider supporting the channel by donating good luck and see you on the other side of success