Finance Act 2002

Contracts to satisfy accounting requirements etc

3 (1) A relevant contract is not a derivative contract for the purposes of this Schedule for any accounting period unless—

(a) it is treated for accounting purposes as a derivative financial instrument,

(b) in the case of a relevant contract falling within paragraph 6 or 7 which is not treated as described in paragraph (a), it is treated for accounting purposes as a financial asset, or

(c) in the case of a relevant contract which is not treated as described in paragraph (a) or (b), it falls within sub-paragraph (2).

(2) A relevant contract falls within this sub-paragraph if—

(a) its underlying subject matter is commodities, or

(b) it is a contract for differences whose underlying subject matter is—

(i) intangible fixed assets,

(ii) weather conditions, or

(iii) creditworthiness.

(3) For the purposes of sub-paragraph (1)(a), a relevant contract of a company is treated for accounting purposes as a derivative financial instrument for an accounting period if, for that accounting period, it is so treated for the purposes of the relevant accounting standard used by the company for that accounting period (or would be so treated if the company were a company which used the relevant accounting standard in respect of the relevant contract).

(4) For the purposes of sub-paragraph (1)(b), a relevant contract of a company is treated for accounting purposes as a financial asset for an accounting period if, for that accounting period, it is so treated for the purposes of the relevant accounting standard used by the company for that accounting period (or would be so treated if the company were a company which used the relevant accounting standard in respect of the relevant contract).

(5) For the purposes of sub-paragraphs (3) and (4), the “relevant accounting standard” used by a company for an accounting period is—

(a) in relation to any accounting period for which it is required or permitted to be used by the company, Financial Reporting Standard 13 issued in September 1998 by the Accounting Standards Board, as it has effect for periods of account ending on 31st December 2002, or

(b) in relation to any accounting period for which it is required or permitted to be used by the company, any subsequent accounting standard dealing with transactions which are derivative financial instruments or financial assets under Financial Reporting Standard 13, as from time to time amended.