Embedded derivative
IFRS 9 requires financial asset hosts within its scope to be classified and measured as a whole; do not separately account for an embedded derivative in such a host. For other hosts, assess the standard’s separation criteria, including whether the embedded feature is closely related to the host and whether the hybrid is already measured at fair value through profit or loss.
Worked example
A contract includes a non-financial host and a separately identifiable return linked to an unrelated market index. The entity assesses the IFRS 9 separation criteria before deciding whether the embedded feature is accounted for separately.
Common mistake
Separating every embedded feature automatically, or applying the non-financial-host separation test to a hybrid financial asset classified under IFRS 9 as a whole.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Supporting | September 2026–June 2027 |