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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Q2a – December 2010
Hello
I am reading the answer to Q2a – December 2010 which mentions:
“Contracts to buy or sell non-financial items are within the scope of IAS 39 if they can be settled net in cash or another financial asset and are not entered into and held for the purpose of the receipt or delivery of a non-financial item in accordance with the entity’s expected purchase, sale, or usage requirements.”
I do not understand “are not entered into and held for the purpose of the receipt or delivery of a non-financial item in accordance with the entity’s expected purchase, sale, or usage requirements.”
Kindly explain in simple terms.
Hi,
If you buy a futures contract with the intention to settle it in cash then it is a financial instrument. If you buy the futures contract to receive the commodity (gold, wheat, crude oil) at the end of the futures contract then it is not a financial instrument.
Thanks