CERTYNEX IFRS ACADEMY

Sigma SA, a cable manufacturer, enters into a contract to buy copper for its production needs, with physical delivery. The contract could be settled net in cash, and Sigma has in the past settled similar contracts net on several occasions. Which conclusion should be drawn?

The contract stays outside the scope, because copper is a non-financial item delivered physically.

The contract stays outside the scope, because it is entered into for the entity's expected production needs.

The contract falls under IFRS 9 after Sigma designates it at fair value through profit or loss; without that designation, it stays outside the scope.

The contract falls under IFRS 9: the past practice of net settlement stands in the way of the own-use exception.