CFM92480 | Debt Cap: the available amount: conditions for fair value mismatches

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Fair Value Adjustments - regulations 3 and 4

Regulations 3 and 4 of the Mismatch Regulations corrects difference between the financing expense or income of a company and financing expense amounts within the available amount that arise from fair value accounting. Although the Regulations refer to amounts brought into account as loan relationships under CTA09/PT5 in practise they also include loan debits under CTA09/PT3 (trading income).

Regulation 4 sets out four conditions which have to be met for regulation 3 to apply;

• the relevant group company is party to a relevant financial relationship in the period,

• that a debit in relation to the relevant financial relationship is a financing expense amount of that company,

• that an amount in respect of the relevant financial relationship is included in the available amount

• that a fair value adjustment is made in relation to the relevant financial relationship by the relevant group company in the relevant accounting period.

Where a relevant financial relationship meets the conditions in regulation 4, regulation 3 will apply to adjust the available amount