Part 5Loan Relationships
Chapter 3The credits and debits to be brought into account: general
Accounting bases
313Basis of accounting: “amortised cost basis”, “fair value accounting” and “fair value”
(1)
The general rule is that the amounts to be brought into account by a company as credits and debits for any period of account for the purposes of this Part may be determined on any basis of accounting that is in accordance with generally accepted accounting practice F1... .
(2)
But subsection (1) is subject to F2... the following provisions (which require a particular accounting basis to be used)—
(a)
section 312(5) and (6) (determination of credits and debits where amounts not fully recognised for accounting purposes),
(b)
section 349(2) (application of amortised cost basis to connected companies relationships),
(c)
section 382(2) (company partners using fair value accounting),
(d)
section 399(2) (index-linked gilt-edged securities: application of fair value accounting),
F3(e)
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F3(f)
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(g)
section 482(2) (application of amortised cost basis of accounting to discounts arising from a money debt under a relevant non-lending relationship), F4and
(h)
section 490(3) (holdings in OEICs, unit trusts and offshore funds: application of fair value accounting) F5... .
F5(i)
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F6(3)
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(4)
In this Part “amortised cost basis of accounting”, in relation to a company's loan relationship, means a basis of accounting under which an asset or liability representing the loan relationship is F7measured in the company's balance sheet at its amortised cost using the effective interest method, but with that amortised cost being adjusted as necessary where the loan relationship is the hedged item under a designated fair value hedge.
F8(4A)
In subsection (4) each of the following expressions has the meaning that it has for accounting purposes—
“amortised cost”, in relation to assets or liabilities;
“the effective interest method”, in relation to the measurement of assets or liabilities.
F9(5)
In this Part “fair value accounting” means a basis of accounting under which—
(a)
assets and liabilities are measured in the company's balance sheet at their fair value, and
(b)
changes in the fair value of assets and liabilities are recognised as items of profit or loss.
F10(6)
For the meaning of “fair value”, see section 476(1).
(7)
In this Part each of the following has the meaning that it has for accounting purposes—
“designated fair value hedge”;
“hedged item”.