FAQs

What is SPPI Test? SPPI test means Solely Payment of Principal and Interest. The SPPI test is performed at the instrument level. So, if the test passes for one, it...

Contract to deal in non-financial item Is a contract to buy or sell a non-financial item, a financial instrument? A contract to deal with a non-financial item is not a...

Is there a choice to designate as FVTPL? An entity has choice to designate a financial asset as measured at fair value through profit or loss. Explain. The option to...

What is an embedded derivative? What is an embedded derivative? An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to...

Is hedge accounting mandatory? Is hedge accounting mandatory or optional? Hedge accounting is not mandatory. However, considering the benefits of complying with hedge accounting, entities would want to follow hedge...

Cash flow hedge Vs fair value hedge What is a cash flow hedge and how is it different from a fair value hedge? A cash flow hedge is a hedge...

Carrying amount of a non-monetary item How is the carrying amount of a non-monetary item determined on a valuation date for a foreign currency transaction? The carrying amount is determined...

Treatment when hedge accounting not qualified An entity follows hedge accounting as per previous GAAP. However, the same does not qualify for hedge accounting as per Ind AS 109. What...

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...

Classification of derivative instruments How are derivative instruments classified? Derivative instruments are a subset of financial instruments. In the definition of financial asset, we have the following phrase, viz, “to...