International GAAP 2021

Chapter 46Financial instruments: Derivatives and embedded derivatives

• 1 INTRODUCTION
• 2 DEFINITION OF A DERIVATIVE
  • 2.1 Changes in value in response to changes in underlying
    • 2.1.1 Notional amounts
    • 2.1.2 Underlying variables
    • 2.1.3 Non-financial variables specific to one party to the contract
  • 2.2 Initial net investment
  • 2.3 Future settlement
• 3 EXAMPLES OF DERIVATIVES
  • 3.1 Common derivatives
  • 3.2 In-substance derivatives
  • 3.3 Regular way contracts
• 4 EMBEDDED DERIVATIVES
• 5 EMBEDDED DERIVATIVES: THE MEANING OF ‘CLOSELY RELATED’
  • 5.1 Financial instrument hosts
    • 5.1.1 Foreign currency monetary items
    • 5.1.2 Interest rate indices
    • 5.1.3 Fallback provisions relating to interest rate benchmark reform
    • 5.1.4 Term extension and similar call, put and prepayment options in debt instruments
    • 5.1.5 Interest rate floors and caps
    • 5.1.6 Inflation-linked debt instruments
    • 5.1.7 Commodity- and equity-linked interest and principal payments
    • 5.1.8 Credit-linked notes
    • 5.1.9 Instruments with an equity kicker
    • 5.1.10 Puttable instruments
  • 5.2 Contracts for the sale of goods or services
    • 5.2.1 Foreign currency derivatives
      • 5.2.1.A Functional currency of counterparty
      • 5.2.1.B Routinely denominated in commercial transactions
      • 5.2.1.C Commonly used currencies
      • 5.2.1.D Examples and other practical issues
    • 5.2.2 Inputs, ingredients, substitutes and other proxy pricing mechanisms
    • 5.2.3 Inflation-linked features
    • 5.2.4 Floors and caps
    • 5.2.5 Fund performance fees
  • 5.3 Leases
    • 5.3.1 Foreign currency derivatives