Commentary

D4.202A UK resident companies—trading companies

Corporate tax
Corporate tax | Commentary

D4.202A UK resident companies—trading companies

Corporate tax | Commentary

D4.202A UK resident companies—trading companies

Sterling functional currency and non-sterling presentation currency

These provisions apply only to UK companies that are not investment companies, with separate provisions applying to UK resident investment companies.

Where a UK resident company identifies sterling as its functional currency and prepares its accounts in a non-sterling currency (presentational currency), it will be required to determine its profits or losses that fall to be computed in accordance with generally accepted accounting practice as if its accounts had been prepared in sterling1. A company's functional currency, in the present context, is defined as the currency of the primary economic environment in which the company, or part of the company's business, operates2.

There are provisions to cover cases where a company's functional currency changes from sterling to another currency and these apply where―

  1.  

    (a)     a sterling loss is carried forward3 to a future period and the company's functional currency in that future period is no longer sterling4. In such cases the sterling loss is required to be translated into the company's new functional currency by reference to the spot rate of exchange at the start of the

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