Complex stand-alone derivative – no unquoted equity underlying
Company Z acquires a complex stand-alone derivative that is based on several underlying variables, including commodity prices, interest rates, and credit indices. There is no active market or other price quotation for the derivative and no active markets for some of its underlying variables.
The presumption that the derivative’s fair value can be reliably determined cannot be overcome because it is not linked to, or required to be settled by delivery of, an unquoted equity instrument. It cannot, therefore, be carried at cost.51