Hybrid contracts with a host that is an asset within the scope of IFRS 9
BC4.83 An embedded derivative is a derivative component of a hybrid contract that also includes a non-derivative host, with the effect that some of the cash flows of the combined contract vary like the cash flows of a stand-alone derivative contract. IAS 39 required an entity to assess all contracts to determine whether they contain one or more embedded derivatives that are required to be separated from the host and accounted for as stand-alone derivatives.
BC4.84 Many respondents to the Discussion Paper Reducing Complexity in Reporting Financial Instruments commented that the requirements and guidance in IAS 39 were complex, rule-based and internally inconsistent. Respondents, and others, also noted the many application problems that arose from requirements to assess all non-derivative contracts for embedded derivatives and, if required, to account for and measure those embedded derivatives separately as stand-al
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