Document ID: chunk:federal_register_of_legislation:F2023C00406:body:0:p43
Version: federal_register_of_legislation:F2023C00406
Segment Type: other
Provision Reference: 
Character Range: 108540–112138

sell shares                                                                         IE7
          Example 3: Purchased call option on shares                                                                IE12
          Example 4: Written call option on shares                                                                  IE17
          Example 5: Purchased put option on shares                                                                 IE22
          Example 6: Written put option on shares                                                                   IE27
          ENTITIES SUCH AS MUTUAL FUNDS AND CO-OPERATIVES WHOSE SHARE CAPITAL IS NOT EQUITY AS DEFINED IN AASB 132  IE32
          Example 7: Entities with no equity                                                                        IE32
          Example 8: Entities with some equity                                                                      IE33
          ACCOUNTING FOR COMPOUND FINANCIAL INSTRUMENTS                                                             IE34
          Example 9: Separation of a compound financial instrument on initial recognition                           IE34
          Example 10: Separation of a compound financial instrument with multiple embedded derivative features      IE37
          Example 11: Repurchase of a convertible instrument                                                        IE39
          Example 12: Amendment of the terms of a convertible instrument to induce early conversion                 IE47

Illustrative examples
These examples accompany, but are not part of, AASB 132.

Accounting for contracts on equity instruments of an entity
IE1 The following examples[4]  illustrate the application of paragraphs 15–27 and AASB 9 to the accounting for contracts on an entity's own equity instruments (other than the financial instruments specified in paragraphs 16A and 16B or paragraphs 16C and 16D).

Example 1: Forward to buy shares
IE2 This example illustrates the journal entries for forward purchase contracts on an entity's own shares that will be settled (a) net in cash, (b) net in shares or (c) by delivering cash in exchange for shares. It also discusses the effect of settlement options (see (d) below). To simplify the illustration, it is assumed that no dividends are paid on the underlying shares (ie the 'carry return' is zero) so that the present value of the forward price equals the spot price when the fair value of the forward contract is zero. The fair value of the forward has been computed as the difference between the market share price and the present value of the fixed forward price.

Assumptions:
Contract date                                      1 February 20X2
Maturity date                                      31 January 20X3

Market price per share on 1 February 20X2          CU100
Market price per share on 31 December 20X2         CU110
Market price per share on 31 January 20X3          CU106

Fixed forward price to be paid on 31 January 20X3  CU104
Present value of forward price on 1 February 20X2  CU100
Number of shares under forward contract            1,000

Fair value of forward on 1 February 20X2           CU0
Fair value of forward on 31 December 20X2          CU6,300
Fair value of forward on 31 January 20X3           CU2,000

(a) Cash for cash ('net cash settlement')
IE3 In this subsection, the forward purchase contract on the entity's own shares will be settled net in cash, ie there is no receipt or delivery of the entity's own shares upon settlement of the forward contract.
On 1 February 20X2,