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Reassessment of Embedded Derivatives
AG109. In accordance with paragraph 49, an entity shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. An entity determines whether a modification to cash flows is significant by considering the extent to which the expected future cash flows associated with the embedded derivative, the host contract or both have changed and whether the change is significant relative to the previously expected cash flows on the contract.
AG110. Paragraph AG109 does not apply to embedded derivatives in contracts acquired in:
(a) A PBE combination (as defined in PBE IPSAS 40 PBE Combinations); or
(b) [Deleted by NZASB]
(c) The formation of a joint venture as defined in PBE IPSAS 37 Joint Arrangements
or their possible reassessment at the date of acquisition.