Financial Reporting · Recognition and Derecognition of Financial Instruments

Regular Way Purchase or Sale of Financial Assets (Ind AS 109)

Updated 5 October 2026 · Fact-checked

A regular way purchase or sale is a trade of a financial asset where delivery happens within the time set by market regulation or convention. Ind AS 109 lets you recognise and derecognise it on the trade date or the settlement date, applied consistently by category. Between the two dates, record fair value changes according to the asset's category.

Understand Regular Way Purchase or Sale of Financial Assets

When you buy shares or bonds on a stock exchange, the deal is struck on one day (the trade date) and the shares and cash change hands a few days later (the settlement date). The question is: on which day do you put the asset on your books, or take it off?

A regular way contract is one that requires delivery of the asset within the time frame established by regulation or convention in the marketplace concerned. Exchange trades in listed shares and bonds are typical. A contract that does not meet this test, or that is settled in a way outside market convention, is not a regular way contract. It may need to be accounted for as a derivative.

For regular way trades, Ind AS 109 gives you a choice of method. Under trade date accounting, you recognise the asset you will receive (and the liability to pay) on the trade date. For a sale, you derecognise the asset and book the gain or loss on the trade date, and show a receivable. Under settlement date accounting, you recognise a purchased asset only on the day you receive it, and derecognise a sold asset only on the day you deliver it.

For a sale under settlement date accounting, the asset stays on your books until delivery. Until then, you account for any change in its fair value as its category requires. On the delivery day, you derecognise the asset and book the gain or loss. The gain or loss is the sale proceeds less the carrying amount at the delivery date.

You must apply the same method consistently to all purchases and sales of financial assets classified in the same way. Assets mandatorily at FVTPL, assets designated at FVTPL, assets at amortised cost, debt assets at FVOCI, and equity investments designated at FVOCI are treated as separate classifications. You can use different methods for different classifications, but not within one.

The tricky part is the gap between the two dates. Under trade date accounting, the asset is already yours (or already gone), so normal rules apply. Under settlement date accounting, you still account for fair value changes of the asset to be received in the same way as you would for the asset once acquired. For amortised cost assets, no fair value change is recognised. For assets at FVTPL, the change goes to profit or loss. For debt assets at FVOCI and for equity investments designated at FVOCI, the change goes to OCI. For a sale, the asset is still on your books until delivery, so it follows its own category up to that date.

Key rules to remember

Regular way definition: Regular way = delivery within the time frame set by regulation or convention in the marketplace; If the contract does not meet this test, it is not regular way and may be a derivative.
Trade date accounting: purchase: On trade date: Dr Financial asset (at fair value) | Cr Payable to broker/seller; Transaction costs are added to the asset unless it is at FVTPL, where they are expensed. The asset then follows its normal subsequent measurement.
Trade date accounting: sale: On trade date: Dr Receivable (sale price) | Cr Financial asset (carrying amount) | Cr/Dr Gain or loss; Derecognise the asset and book the gain or loss on the trade date. Any change in the asset's carrying amount up to the trade date is recorded first.
Settlement date accounting: purchase: No entry on trade date. On settlement date: Dr Financial asset | Cr Cash; Between the two dates, record fair value changes of the asset to be received by category: none for amortised cost, P&L for FVTPL, OCI for FVOCI.
Settlement date accounting: sale: No entry on trade date. Until delivery, record fair value changes by category. On delivery date: Dr Cash | Cr Financial asset (carrying amount at delivery) | Cr/Dr Gain or loss; The asset stays on your books until delivery and is measured according to its category in the gap period (no change for amortised cost, P&L for FVTPL, OCI for FVOCI). The gain or loss is sale proceeds less the carrying amount at delivery.
Consistency rule: One method for all purchases and sales within the same classification; Different classifications may use different methods.

How to solve Regular Way Purchase or Sale of Financial Assets questions

Use this sequence for any regular way question. It stops you mixing the two methods.

1Check that the contract is regular way: delivery within market convention. If not, stop and consider derivative treatment.
2Note the trade date, settlement date and reporting date. Mark whether the reporting date falls between the first two.
3Identify the asset's classification: amortised cost, FVOCI (debt or equity) or FVTPL. This decides the treatment of fair value changes.
4Identify the method required: trade date or settlement date. Note that the method must be consistent within the classification.
5Trade date method: for a purchase, recognise the asset and the payable at the trade date. For a sale, derecognise the asset, recognise the receivable and book the gain or loss at the trade date. Then apply normal subsequent measurement.
6Settlement date method: make no entry at the trade date. If the reporting date falls in the gap, recognise fair value changes only as the category requires. Book the asset or the sale at settlement.
7Treat transaction costs correctly: expense for FVTPL, include in initial cost otherwise.
8Write the entries with dates and state the effect on the balance sheet and profit at the reporting date.

Quickest way: Two-column timeline

When to use it: Use when a question gives trade, settlement and reporting dates and asks for entries or the amount in the financial statements.

Draw a line with three points: trade date, reporting date, settlement date.
Under trade date, write the full entry at the first point, then the fair value change at the reporting date.
Under settlement date, leave the first point blank. At the reporting date, post only the fair value change allowed by the category (nothing for amortised cost).
At the settlement point, post the cash entry and, for settlement date accounting, the recognition or derecognition.
Compare the two columns. For assets whose gains and losses go through profit or loss, the total profit over time is the same, but the timing and the balance sheet size differ. For FVOCI assets, the fair value changes are recognised in OCI, not in profit. For equity investments designated at FVOCI, they are never recycled to profit or loss.

Common mistakes in Regular Way Purchase or Sale of Financial Assets

Assuming settlement date accounting means ignoring fair value changes in the gap.
Students remember 'no entry until settlement' and stop there.
Fix: Apply the category rule: no change for amortised cost, P&L for FVTPL, OCI for FVOCI assets.
Switching methods for a single trade or for individual purchases within the same classification.
Students pick whichever gives a convenient answer.
Fix: State that the chosen method is applied consistently to all trades in the same classification.
Capitalising brokerage on an FVTPL purchase.
They remember 'transaction costs are added to cost' from the general rule.
Fix: For FVTPL assets, expense transaction costs in profit or loss. For other categories, add them to the initial carrying amount.
Treating every purchase of shares as regular way.
The definition is skipped.
Fix: Check that delivery occurs within the time set by market regulation or convention. A privately negotiated deal with delivery outside convention is not regular way.
Booking a gain on sale at the trade date under settlement date accounting.
Students mix up the two methods.
Fix: Under settlement date accounting, the asset is derecognised and the gain or loss recognised on the delivery day.
Showing both the asset and the payable under settlement date accounting.
They carry the trade date entry over.
Fix: Under settlement date accounting there is no recognised payable or asset during the gap, except the fair value change where the category requires it.

Worked examples

Example 1

A company buys 10,000 listed equity shares through a stock exchange on 29 March 20X1 for ₹10,00,000, with settlement on 2 April 20X1 (the market convention). The shares are held for trading and measured at FVTPL. Brokerage of ₹5,000 is paid on the trade date. Fair value on 31 March 20X1 is ₹10,40,000. Pass the entries up to 31 March under (a) trade date accounting and (b) settlement date accounting, and state the effect on profit.

Show the solution

The contract is regular way. The asset is FVTPL, so brokerage is expensed under both methods and fair value changes go to profit or loss.
(a) Trade date, 29 March: Dr Investment in shares ₹10,00,000 | Cr Payable to broker ₹10,00,000. Dr Brokerage expense ₹5,000 | Cr Bank ₹5,000.
(a) 31 March: Dr Investment ₹40,000 | Cr Fair value gain (P&L) ₹40,000. The balance sheet shows investment ₹10,40,000 and payable ₹10,00,000.
(a) Settlement, 2 April: Dr Payable ₹10,00,000 | Cr Bank ₹10,00,000.
(b) 29 March: no entry for the asset or the payable. Brokerage of ₹5,000 is still expensed, exactly as under (a): Dr Brokerage expense ₹5,000 | Cr Bank ₹5,000.
(b) 31 March: the asset is FVTPL, so recognise the change in fair value of the asset to be received: Dr Asset to be received ₹40,000 | Cr Fair value gain (P&L) ₹40,000. This ₹40,000 is a separate asset for the value change only. The shares (₹10,40,000) and the obligation to pay (₹10,00,000) are not recognised, so the balance sheet shows ₹40,000 and no payable.
(b) Settlement, 2 April: Dr Investment in shares ₹10,40,000 (at fair value on that date, assumed ₹10,40,000) | Cr Bank ₹10,00,000 | Cr Asset to be received ₹40,000. The entry balances at ₹10,40,000 on each side.

Answer: Profit to 31 March is the same under both methods: fair value gain ₹40,000 less brokerage ₹5,000 = ₹35,000. Brokerage is expensed under both methods. Trade date accounting shows investment ₹10,40,000 and payable ₹10,00,000 at 31 March. Settlement date accounting shows only a ₹40,000 asset to be received, whose gain is taken to profit or loss, and no payable.

Example 2

A company holds a bond measured at amortised cost with a carrying amount of ₹50,00,000. It agrees on 28 March 20X1 to sell it on the exchange for ₹52,00,000, with delivery and cash on 3 April 20X1 (within market convention). The reporting date is 31 March 20X1. Ignore accrued interest and expected credit loss. Show the entries and the profit for the year ended 31 March 20X1 under (a) trade date and (b) settlement date accounting.

Show the solution

The contract is regular way and the asset is at amortised cost, so no fair value change is recognised in the gap.
(a) Trade date, 28 March: Dr Receivable from broker ₹52,00,000 | Cr Investment in bond ₹50,00,000 | Cr Gain on sale (P&L) ₹2,00,000.
(a) Settlement, 3 April: Dr Bank ₹52,00,000 | Cr Receivable ₹52,00,000.
(a) At 31 March, the bond is no longer shown, a receivable of ₹52,00,000 is shown, and the year's profit includes a gain of ₹2,00,000.
(b) 28 March: no entry. At 31 March the bond remains at ₹50,00,000, as no fair value change is recognised for amortised cost assets. No gain is recognised.
(b) Settlement, 3 April: Dr Bank ₹52,00,000 | Cr Investment in bond ₹50,00,000 | Cr Gain on sale ₹2,00,000. The gain is sale proceeds less the carrying amount at delivery (₹50,00,000). This falls in the next year.

Answer: Under trade date accounting the ₹2,00,000 gain is in the year to 31 March 20X1 and a ₹52,00,000 receivable is shown. Under settlement date accounting the bond stays at ₹50,00,000 and the gain is recognised in the next year on 3 April.

Exam tips

Write the trade date, settlement date and reporting date at the top of your answer. Marks are often lost by ignoring the gap.
Always name the classification (FVTPL, FVOCI or amortised cost) before treating fair value changes in the gap under settlement date accounting.
State the consistency rule in one line. Examiners expect it in theory questions.
For a short note, give the regular way definition, both methods, and the treatment of fair value changes between the dates.
In MCQs, check whether the question asks for the amount at the reporting date or the total gain. These differ between the two methods when the reporting date falls inside the gap.

Practice questions from Recognition and Derecognition of Financial Instruments

Regular Way Purchase or Sale of Financial Assets: frequently asked questions

What is the difference between trade date and settlement date accounting?

Trade date accounting recognises the asset or derecognises it on the day the deal is made. Settlement date accounting does so on the day the asset is delivered. For assets whose gains and losses go through profit or loss, the total profit over time is the same, but the timing of recognition and the balance sheet differ. For FVOCI assets, the fair value changes are recognised in OCI, not in profit.

Can a company use trade date accounting for some purchases and settlement date accounting for others?

Only across different classifications. Within the same classification, such as all assets at amortised cost, the same method must be used for all purchases and sales.

How do I treat fair value changes between trade date and settlement date?

Under trade date accounting, apply the normal rules for the asset. Under settlement date accounting, treat the change as if you already held the asset: nothing for amortised cost, profit or loss for FVTPL, OCI for FVOCI.

Does this apply to every purchase of shares or bonds?

No. It applies only to regular way contracts, where delivery is within the time set by regulation or market convention. Other contracts may be derivatives.