Commentary

D1.732 Loan relationships—Matching

Corporate tax
Corporate tax | Commentary

D1.732 Loan relationships—Matching

Corporate tax | Commentary

D1.732 Loan relationships—Matching

The Disregard Regulations1 enable companies to bring into (or leave out of) account foreign exchange movements which are matched with certain items in computing its loan relationship profits.

Matching shares, ships or aircraft

For periods of account beginning on or after 1 January 2015, where a company prepares its accounts in accordance with IFRS 9, FRS 101 or FRS 102 it is not permitted to take exchange movements arising on a debtor loan relationship or derivative contract which is used to hedge exchange movements on investments in shares in a subsidiary, joint venture or an associate, in ships or in aircraft to reserves in its individual (as opposed to consolidated) accounts.

For accounting periods commencing before 1 January 2015, where a company prepared its accounts in accordance with UK generally accepted accounting practice and it did not adopt FRS 26, it was possible, under SSAP 20, for it to take exchange movements arising on a debtor loan relationship which it is using to hedge an investment in shares in a subsidiary, associate or joint venture to reserves in its accounts2. However, where it adopted FRS 26 it was not permitted to take such exchange movements nor exchange movements on a debtor loan relationship which is used to hedge exchange movements arising in respect of ships or aircraft to its statement of changes in equity in its individual, as opposed to consolidated, accounts. This was because in such cases it was also required to adopt FRS 23, which incorporated IAS

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