IAS 2 — Commodity loan transactions

Date recorded:

Commodity loans - Agenda Paper 8D


In November 2016 the Interpretations Committee received a request to clarify the accounting for commodity loan transactions. The scenario described by the submitter was of an entity borrowing a fungible commodity such as gold from a lender for a fixed period of time, with legal title passing to the entity on physical receipt of the commodity. There are no cash flows at inception. Instead the entity pays a fixed quarterly fee to the lender for the duration of the contract based on the value of the commodity and relevant interest rates at inception. At maturity the entity must deliver a commodity of the same type, quantity and quality to the lender, although an entity could have an option to settle in cash on the basis of the spot price of the commodity.

The entity then itself becomes a lender in a similar transaction with another party, but for a higher quarterly fee. The parties are not related to one another and the second contract was negotiated independently of the first.

The submitter asked whether the entity that initially borrows and then lends the commodity should recognise an asset and a liability in respect of these transactions.

The IC agreed that there was a multitude of commodity transactions and acknowledged that they represented a big issue in practice and that there was diversity in accounting for them. However, the IC believed that this issue was far too broad for the IC to address. One IC member was particularly concerned that if the IC tried to address this as a narrow scope amendment, the resulting guidance would be the only guidance on commodities and that would present an even stronger reason for entities to apply that guidance by analogy to other types of commodity transactions, but perhaps inappropriately so.

The Committee decided to issue a draft decision not to add this issue to its agenda.

Staff analysis on comment letters received

The Committee received five comment letters. All of the respondents acknowledged that any narrow scope standard-setting activity would be of limited benefit. However, several respondents said that referring to the IAS hierarchy, as suggested by the proposed wording, was unhelpful because there is no clear guidance in IFRS.

Staff recommendations

The Staff recommended that the Committee finalise the agenda decision.


The IC approved the Staff’s recommendation with no technical debate. Rather, the discussion buffeted to and fro between the desirability and danger of providing more guidance on the submitter’s specific fact pattern (similar to the reasons discussed in the November 2016 meeting).

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