IFRS 9 Embedded derivatives

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skosans1
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IFRS 9 Embedded derivatives

Post by skosans1 »

We have a contract with an overseas supplier to supply our company with Oxygen gas. The contract is denominated in US dollars and therefore payments will be in US dollars while our company's currency is South African rands. We pay the supplier a monthly fee for the oxygen supplied. I believe this contract contains an embedded derivative but I am not sure how we should disclose it?
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Marek Muc
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Re: IFRS 9 Embedded derivatives

Post by Marek Muc »

I believe this contract contains an embedded derivative
Why? Because of the foreign currency?
skosans1
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Re: IFRS 9 Embedded derivatives

Post by skosans1 »

Yes because of the foreign currency
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Marek Muc
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Re: IFRS 9 Embedded derivatives

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DJP
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Re: IFRS 9 Embedded derivatives

Post by DJP »

It is an embedded derivative, but it doesn't have to be bifurcated if the functional currency of the supplier is the USD or if these transactions are commonly denominated in USD in SA (assuming that there are not other features in the contract). Otherwise, it has to be bifurcated and accounted for separately.
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JRSB
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Re: IFRS 9 Embedded derivatives

Post by JRSB »

Wow, bifurcate :o
"I am always ready to learn although I do not always like being taught" - Churchill
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Marek Muc
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Re: IFRS 9 Embedded derivatives

Post by Marek Muc »

that's actually a well-established expression in the context of embedded derivatives ;)
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