IFRS 9 Embedded derivatives
IFRS 9 Embedded derivatives
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?
Re: IFRS 9 Embedded derivatives
Why? Because of the foreign currency?I believe this contract contains an embedded derivative
Re: IFRS 9 Embedded derivatives
Yes because of the foreign currency
Re: IFRS 9 Embedded derivatives
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.
Re: IFRS 9 Embedded derivatives
Wow, bifurcate
Re: IFRS 9 Embedded derivatives
that's actually a well-established expression in the context of embedded derivatives