(Practical Guidance on Accounting S

(Practical Guidance on Accounting Standard for Financial Instruments 6) A derivative is a financial instrument with the following characteristics:
► The value of the rights or obligations respond to changes in an underlying variable and the contract has 1) an underlying variable and 2) either a fixed nominal amount or determinable settlement amount, or both a fixed nominal amount and a determinable settlement amount.
► There is no initial net investment or no significant net investment compared to that which would be required for other similar types of contracts that would have a similar response to changes in market conditions.

►Net settlement (payment of the difference) of the contract is required or accepted; net settlement can be easily carried
out separately to the contract, or even if physical settlement occurs, in substance it leaves the counterparty in no different
position than if net settlement had occurred.