Finance Act 2002

Application of accounting methods: election to follow generally accepted accounting practice U.K.

19 (1) Sub-paragraph (2) has effect if, in the case of a company falling within paragraph 52(1)(c) or (d)(companies whose statutory accounts are accounts to which Part 1 of Schedule 21C or 21D to the Companies Act 1985 (c. 6) applies or accounts falling to be drawn up in accordance with the requirements imposed under the law of the home State),—

(a) an authorised mark to market basis of accounting would be used as respects some or all of the company’s derivative contracts, were the company a UK company following generally accepted accounting practice, but

(b) that is not the basis of accounting used as respects those derivative contracts in the company’s statutory accounts.

(2) Where this sub-paragraph has effect in relation to a company, the company may elect to use an authorised mark to market basis of accounting as its authorised accounting method for the purposes of this Schedule in relation to every derivative contract as respects which that basis would be used were it a UK company following generally accepted accounting practice.

(3) Any election under sub-paragraph (2)—

(a) must be made before the expiration of the period of two years following the end of the company’s first accounting period beginning on or after 1st October 2002 in which it is party to a derivative contract in relation to which an election under sub-paragraph (2) may be made;

(b) has effect for that accounting period and all subsequent accounting periods of the company; and

(c) is irrevocable.

(4) A company which makes an election under sub-paragraph (2) as respects its derivative contracts shall be taken for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (c. 8) to have at the same time made an election under section 86(3A) of that Act having effect—

(a) for the accounting periods mentioned in sub-paragraph (3)(b), and

(b) as respects any loan relationships to which the company is or may become a party in any of those accounting periods,

and that election shall so have effect notwithstanding anything in paragraph (a) or (b) of subsection (3B) of that section.