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Hello
I have read the answer to this question shown below but its difficult to understand, can you please answer it in simple terms?
Gasnature has entered into a 10-year contract with Agas for the purchase of natural gas. Gasnature has made
an advance payment to Agas for an amount equal to the total quantity of gas contracted for 10 years which has
been calculated using the forecasted price of gas. The advance carries interest of 6% per annum, which is settled
by way of the supply of extra gas. Fixed quantities of gas have to be supplied each month and there is a price
adjustment mechanism in the contract whereby the difference between the forecasted price of gas and the
prevailing market price is settled in cash monthly. If Agas does not deliver gas as agreed, Gasnature has the right
to claim compensation at the current market price of gas. Gasnature wishes to know whether the contract with
Agas should be accounted for under IFRS 9
Financial Instruments
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