Commentary

D1.8120 Bringing credits and debits into account

Corporate tax
Corporate tax | Commentary

D1.8120 Bringing credits and debits into account

Corporate tax | Commentary

Transitional provisions on a change in accounting policy

D1.8120 Bringing credits and debits into account

The following paragraphs consider the transitional rules which apply where a company changes the basis on which it accounts for derivative contacts. These rules apply where, for example, a company begins to prepare its accounts in accordance with 'new' UK GAAP1 (see B2.102). They also applied for earlier accounting periods where a company began to prepare its accounts in accordance with international financial reporting standards (IFRS) or UK GAAP incorporating FRS 26, having previously prepared its accounts in accordance with UK GAAP excluding FRS 26. Where a company first begins to prepare its accounts in accordance with a new accounting policy, any difference between the closing value of the contract under its previous accounting treatment and its opening value for the purposes of the new policy will be brought into account for the purposes of the derivative contracts legislation.

The difference will be picked up in one of two ways:

  1.  

    (a)     where the difference is included as a prior year adjustment for its first accounting period for which it prepares its accounts in accordance with the new policy, any difference will be picked up as a prior adjustment under CTA 2009, s 597(2) in the normal way (see D1.840);

  2.  

    (b)     in any other case the difference will be picked up under CTA 2009, ss 613–615 (see D1.845).

The Treasury has the power by regulation to vary the way in which such differences are brought into account

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