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TMI BlogEmbedded DerivativeX X X X Extracts X X X X X X X X Extracts X X X X ..... alone derivative. A derivative is embedded in a Normal Host contract, Host Contract can be Financial Liability [eg loan taken from a bank] Non-Financial Item [eg purchase/sale of Goods, PPE etc.] When 'host Contract' Dervative embedded in it are 'Not closely Related' then we need to separate Host Contract Embedded Derivative. Precondition for segregation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st debt instrument or the carrying amount of the host insurance contract; OR the exercise price of a prepayment option reimburses the lender for an amount up to the approximate present value of lost interest for the remaining term of the host contract. Lost interest is the product of the principal amount prepaid multiplied by the interest rate differential. The interest rate differential is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired or delivered is routinely denominated in commercial transactions around the world (such as the US dollar for crude oil transactions); or a currency that is commonly used in contracts to purchase or sell non- financial items in the economic environment in which the transaction takes place (eg a relatively stable and liquid currency that is commonly used in local business transactions or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changes in the fair value of the embedded derivative are recorded in profit or loss. 5. On delivery of the non-financial item, the host contract is fulfilled and the embedded derivative is effectively settled. A foreign currency debtor or creditor is recognised for the contract amount, translated at the spot rate in accordance with Ind AS 21. The closing carrying amount of the embedded derivat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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