The $4,055 gain on the forward contract is the change in the fair value of the contract during the period and is recognized in earnings in the same line of the income statement as the foreign currency exchange loss on the payable.
The income statement in the chart "European Operations P&L Translated Into Dollars" is not appropriate for performance measurement because it is not sufficient for reaching meaningful operating conclusions and, as a result, could lead to poor decisions with unfavorable consequences.
Product profitability becomes the creation of an income statement on a product level, where a unique income statement is produced for every product, usually defined as discreet product codes in your systems.
In fact, a portfolio manager from Putnam Investments recently told me that he couldn't remember the last time he reviewed an income statement. His valuation models no longer include any reference to net income or EPS.