Regular way contracts: forward contract

[From Guidance on implementing IFRS 9 Financial Instruments]

Regular way contracts: forward contract

Entity ABC enters into a forward contract to purchase 1 million of M’s ordinary shares in two months for CU10 per share. The contract is with an individual and is not an exchange-traded contract. The contract requires ABC to take physical delivery of the shares and pay the counterparty CU10 million in cash. M’s shares trade in an active public market at an average of 100,000 shares a day. Regular way delivery is three days. Is the forward contract regarded as a regular way contract?

No. The contract must be accounted for as a derivative because it is not settled in the way established by regulation or convention in the marketplace concerned.