Commentary

D1.724 Loan relationships—Change of accounting policy, derecognition of a creditor relationship and amounts not fully recognised for accounting purposes

Corporate tax
Corporate tax | Commentary

D1.724 Loan relationships—Change of accounting policy, derecognition of a creditor relationship and amounts not fully recognised for accounting purposes

Corporate tax | Commentary

D1.724 Loan relationships—Change of accounting policy, derecognition of a creditor relationship and amounts not fully recognised for accounting purposes

There are a number of other specific provisions dealing with certain accounting issues. These are discussed below.

Change of accounting policy

For accounting periods beginning on or after 1 January 2016, the loan relationships legislation contains provision to cover cases both where there is a change to the accounting treatment of a loan relationship or to the basis on which profits or losses arising on a loan relationship are recognised (eg where a company is accounting for a creditor loan relationship using a fair value basis and the loan relationship becomes a connected companies relationship so that the company is required to determine the profits or losses arising on the loan relationship using an amortised cost basis of accounting). In both such cases an adjustment is made equal to the difference between the former carrying value of the loan relationship and its carrying value following the change. Where the adjustment arises as a result of a change to the accounting treatment of the loan relationship this amount will generally be spread over a ten-year period1. Where, however, the difference arises as a result of a loan relationship becoming or ceasing to be a connected companies loan relationship the difference will be recognised in the accounting period in which the loan relationship becomes or ceases to be a connected companies loan relationship2.

For accounting periods beginning before 1 January 2016, where a company changed

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