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United Kingdom Statutory Instruments |
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You are here: BAILII >> Databases >> United Kingdom Statutory Instruments >> The Loan Relationships and Derivative Contracts (Exchange Gains and Losses using Fair Value Accounting) Regulations 2005 No. 3422 URL: http://www.bailii.org/uk/legis/num_reg/2005/20053422.html |
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| Made | 12th December 2005 | ||
| Laid before the House of Commons | 12th December 2005 | ||
| Coming into force | 2nd January 2006 |
Currency
3.
For the purposes of these Regulations the currency with which a company computes its profits and losses as determined by sections 92 to 92E[4] of the Finance Act 1993[5] shall be known as the "base currency".
Exchange gain or loss : general
4.
In these Regulations exchange gain or loss shall not include any debits or credits referred to in regulation 4(1), (3) and (4) of the Loan Relationships and Derivative Contracts (Change of Accounting Practice) Regulations 2004[6].
Exchange gain or loss arising from loan relationship assets or liabilities
5.
—(1) Paragraphs (2) and (3) set out the rules for calculating the exchange gain or loss arising from loan relationship assets or liabilities in the following circumstances—
(2) Where paragraph (1) applies and—
the exchange gain or loss is calculated as set out in paragraph (3).
(3) The exchange gain or loss for any accounting period is the change in fair value between the earlier and the later time in that period that is attributable only to fluctuations in the spot rate of exchange between the currency in which the asset or liability is denominated and the base currency of the company.
6.
If an asset is accounted for as available-for-sale, the exchange gain or loss is the amount shown in the profit and loss account or income statement which fairly represents that gain or loss in accordance with generally accepted accounting practice.
Exchange gain or loss arising from derivative contracts
7.
—(1) Paragraphs (2) and (3) set out the rules for calculating the exchange gain or loss arising from derivative contracts where such a contract is accounted for at fair value.
(2) Where—
the exchange gain or loss is calculated as set out in paragraph (3).
(3) The exchange gain or loss for any accounting period is the change in fair value between the earlier and the later time in that period that is attributable only to fluctuations in the spot rate of exchange between the currency or currencies and the base currency.
Calculation of residual profit and loss
8.
Regulation 9 applies where there is a fair value profit or loss in relation to a loan relationship or derivative contract which is not wholly an exchange gain or loss (as determined by regulations 5 to 7).
9.
—(1) Where there is a fair value profit, the residual profit is calculated by subtracting from the profit any exchange gain, and adding to it the amount of any exchange loss.
(2) Where the exchange gain exceeds the fair value profit, the difference between the two is the residual loss.
(3) Where there is a fair value loss, the residual loss is calculated by adding to the loss any exchange gain or subtracting from it any exchange loss.
(4) Where the exchange loss exceeds the fair value loss the difference between the two is the residual profit.
(5) Residual profits and losses are amounts recognised in determining a company's profit or loss for a period for the purposes of section 85B(1)[7] of the Finance Act 1996 and paragraph 17B(1)[8] of Schedule 26 to the Finance Act 2002.
Vernon Coaker
Dave Watts
Two of the Lords Commissioners of Her Majesty's Treasury
12th December 2005
[2] 2002 c.23. Sub-paragraph (2A) was inserted by paragraph 36 of Schedule 4 to the Finance Act 2005 with effect for periods of account beginning on or after 1st January 2005 and substituted by paragraph 11 of Schedule 6 to the Finance (No.2) Act 2005 with effect from 20 July 2005.back
[4] Sections 92 to 92E were substituted for former sections 92 to 94AB by paragraph 77 of Schedule 10 to the Finance Act 2004 with effect for periods of account beginning on or after 1st January 2005 and, in the case of a company required to prepare accounts under the Companies Act 1985 or the Companies Act (Northern Ireland) Order 1986, any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.back
[7] This section together with section 85A substituted for former sections 85 and 86 by paragraph 3 of Schedule 10 to the Finance Act 2004 with effect for periods of account beginning on or after 1st January 2005, and, in the case of a company required to prepare accounts under the Companies Act 1985 or the Companies Act (Northern Ireland) Order 1986, any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.back
[8] Paragraphs 17A to 17C were substituted for former paragraphs 17 to 20 by paragraph 50 of Schedule 10 to the Finance Act 2004 with effect for periods of account beginning on or after 1st January 2005, and, in the case of a company required to prepare accounts under the Companies Act 1985 or the Companies Act (Northern Ireland) Order 1986, any period of account beginning before that date for which the company is required or permitted to prepare such accounts in accordance with international accounting standards.back
