Derivative
It requires no initial net investment or an investment smaller than would be required for other contracts expected to respond similarly to changes in market factors. Examples include many forwards, options and swaps. Derivatives are generally measured at fair value through profit or loss unless special requirements, such as qualifying hedge accounting, apply. Some contracts to buy or sell non-financial items are outside IFRS 9 when the own-use exception applies.
Worked example
A company enters a currency forward requiring it to exchange currencies in six months at a fixed rate, with no upfront payment. Its value changes with exchange rates and it is a derivative if the other IFRS 9 criteria are met.
Common mistake
Calling every future purchase commitment a derivative without checking the definition and the own-use exception.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Direct | September 2026–June 2027 |