Commentary

D1.863 Matching

Corporate tax
Corporate tax | Commentary

D1.863 Matching

Corporate tax | Commentary

D1.863 Matching

For accounting periods beginning before 1 January 2016 a company prepared its accounts in accordance with UK generally accepted accounting practice and did not adopt FRS 26 it was possible for the company to use a currency contract to hedge exchange exposure arising in respect of an investment in shares, ships or aircraft or its net investment in a UK or overseas branch and for exchange movements to be taken to reserves in its individual (as opposed to consolidated) accounts. In such cases any exchange movements arising on the derivative contract were left out of account in computing the company's derivative contract profits for the accounting period in which they were taken to reserves, provided that the underlying subject matter of the derivative contract consisted wholly or partly of currency1. For times on or after 22 April 2009 the exchange movement arising on a derivative contract that is eligible to be disregarded where it is taken to reserves is limited to amounts determined by reference to spot rates of exchange (as opposed to the forward exchange rate implied in a currency contract)2.

Disregard regulations

Regulations have been made to permit exchange movements arising on a derivative contract to be disregarded in computing a company's derivative contract profits where the derivative contract is treated as matched against shares, ships or aircraft (see below)3 and the company prepares its accounts in accordance with IFRS or FRS 101 or FRS 102 (or FRS 26 for accounting periods before 1 January 2015).

It is

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