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A Ltd. holds a contractual right to exchange a financial asset for another financial asset under conditions that COULD BE either favourable or unfavourable depending on market movements. Under Ind AS 32, this right is:
AAlways recognised as a derivative measured at fair value through profit or loss
BOutside Ind AS 32 because the exchange is contingent on future events
CA financial asset when conditions are potentially favourable; a financial liability when conditions are potentially unfavourable
DNot a financial instrument because the eventual outcome is uncertain
Answer & Solution
Correct answer: C. A financial asset when conditions are potentially favourable; a financial liability when conditions are potentially unfavourable
The Ind AS 32 definitions split exchange contracts by economic direction: a contractual right to exchange under potentially FAVOURABLE terms is a financial asset; under potentially UNFAVOURABLE terms it is a financial liability. Contingency does not exclude the contract from Ind AS 32 — even contingent rights and obligations are within the definition.
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