Accounting for physical settlement of commodity contracts

Pieter van der Zwan

Contracts to buy or sell commodities are accounted for as financial instruments in terms of IFRS 9 Financial Instruments, except if these contracts are entered into by the entity to deliver or receive the underlying commodities. It may happen that a commodity contract is accounted for in terms of IFRS 9, but is ultimately physically settled. The IFRIC published an agenda decision in March with its view on how the physical settlement of such a contract should be accounted for. This article provides an overview of the alternatives considered and the position taken by the IFRIC.

Click here for the full article.