The contract should be considered a derivative under paragraph 9 of IAS 39 because it meets the definition of a derivative and has all three characteristics of a derivative (i.e., its value changes in response to changes in an underlying variable, it requires no initial net investment, and it is settled at a future date).

In this case, the swap involves the exchange of fixed and floating interest payments, with the value of the swap changing in response to changes in the floating interest rate. Additionally, since the fixed leg of the swap is prepaid at inception, there is no initial net investment required by X Inc. Finally, the settlement of the swap occurs at future dates (i.e., every January 2 and July 2).

Therefore, the swap should be recognized as a derivative on X Inc's balance sheet and measured at fair value.