Contract meant for own use

Can a written option that results in the delivery of a non-financial item be treated as a financial instrument, as the non-financial item is meant for own use?

If the derivative contract is a purchased call option or a future contract to buy a non-financial item, this may be covered under the own use exemption, as a result of which such contracts may be outside the scope of the financial instruments standards. Some written options like written put option may also result in the physical delivery of a non-financial item.

For example, a written put option contract to deal in say, copper futures may result in taking delivery of copper if the buyer of the put option exercises the put option contract. Such written contracts will not be covered under the own use exemption, as the entity cannot insist on the delivery of the non-financial asset but will be forced to take delivery when the put option is exercised by the buyer of such option. Hence, the general rule is that written options will always be within the scope of the financial instruments standards irrespective of whether such contracts result in physical delivery of the non-financial asset or not. Such a contract cannot be entered into for the purpose of the receipt or delivery of the non-financial item in accordance with the entity’s expected purchase, sale or usage requirements.

Ind AS Accounting Standards