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Hi,
Company A has contracted to sell a building worth $10m to company B. In exchange B will issue a fixed 10m of its shares to A, after six months. In this case, the contract, which gives A, the right to receive shares of B, is a financial asset for A. Any change in the value of shares will result in a gain/loss to A.
So the value of the contract, which gives A the right to receive shares, is derived from the value of the underlying asset i.e. B’s shares. Will this contract be treated as a derivatie, in A’s books?
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