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IAS 39 - Definition of a Derivative

Date recorded:

The purpose of this session was to ask the Board how to progress with the proposed amendment to the definition of a derivative in IAS 39 in the annual improvements 2007. The Board had decided to defer the issue to allow for further research.

The original submission was raised with IFRIC asking whether 'provided in the case of a non-financial variable that the variable is not specific to the party to the contract' relates only to insurance contracts.

The staff noted that the majority of the comment letters submitted on the annual improvement 2007 proposals objected to the change in the definition of a derivative as this would broaden the scope of IAS 39 to many situations.

The staff highlighted that originally IAS 39 did not contain the words proposed to delete, but that IFRS 4 consequentially amended IAS 39. One Board member remembered that this change was originally made to scope out insurance contracts from the definition of a derivative. The IFRIC coordinator expressed concerns over the deletion as this would lead to many submissions to the IFRIC on the meaning of 'other variable'.

The staff recommended not to pursue the proposed amendment and to include the considerations in the comprehensive financial instrument account review project. One Board member noted that this project is not on the IASB's active agenda yet. The Board agreed not to proceed with the proposed amendment, but asked the staff to come back with proposals on how to proceed with the issue.

Correction list for hyphenation

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