The Finance Act 2002, Schedule 26, Parts 2 and 9 (Amendment No. 2) Order 2004

Amendments of Part 9 of Schedule 26

12.—(1) Paragraph 50A(1) is amended as follows.

(2) For sub-paragraph (1) substitute—

“(1) This paragraph applies where—

(a) there is a change of accounting policy in drawing up a company’s accounts from one period of account (the “earlier period”) to the next (the “later period”), and

(b) the approach in each of those periods accorded with the law and practice applicable in relation to that period.

(1A) This paragraph applies, in particular, where—

(a) the company prepares accounts for the earlier period in accordance with UK generally accepted accounting practice and for the later period in accordance with international accounting standards, or

(b) the company prepares accounts for the earlier period in accordance with international accounting standards and for the later period in accordance with UK generally accepted accounting practice.”.

(3) In sub-paragraph (3), after “means” insert “subject to paragraph (3B),”.

(4) After that sub-paragraph insert—

“(3A) For the purposes of this paragraph the “carrying value” of a contract includes amounts recognised for accounting purposes in relation to the contract in respect of—

(a) accrued amounts;

(b) amounts paid or received in advance;

(c) impairment losses (including provisions for bad or doubtful debts).

(3B) In determining the profits, gains and losses to be recognised in determining the carrying value of the contract for the purposes of this paragraph, the following provisions—

(a) section 94A(2) of the Finance Act 1996(2) (loan relationships with embedded derivatives), and

(b) paragraphs 21 and 28 of this Schedule

apply as they apply for the purposes of determining the credits and debits to be brought into account under this Schedule.

(3C) Where—

(a) a company has ceased to be a party to a derivative contract,

(b) paragraph 53(3) of this Schedule (credits and debits to be brought into account in respect of profits and losses arising in the cessation period) applied to the cessation, and

(c) there is a difference between—

(i) the amount outstanding in respect of the derivative contract at the end of the earlier period, and

(ii) the amount outstanding in respect of the derivative contract at the beginning of the later period,

a debit or credit (as the case may be) corresponding to that difference shall be treated as a debit or credit falling within sub-paragraph (2).

(3D) In sub-paragraph (3C), “the amount outstanding”, in respect of a derivative contract, means so much of the amount recognised as deferred income or deferred loss in the company’s balance sheet, in accordance with generally accepted accounting practice, in respect of the profits, gains or losses that arose from that relationship or a related transaction in the cessation period (within the meaning of section 103(6)) as has not been represented by debits or credits brought into account under this Schedule.”.

(5) Omit paragraph (4).

(6) After sub-paragraph (4) insert—

“(5) This paragraph does not apply if or to the extent that such a debit or credit as is mentioned in sub-paragraph (2) falls to be brought into account apart from this paragraph.”.

(1)

Paragraph 50A was inserted by paragraph 67 of Schedule 10 to the Finance Act 2004.

(2)

Section 92A was inserted by section 52 to, and paragraph 13 of Schedule 10 to, the Finance Act 2004.