Section 607A | Company is not, or has ceased to be, party to derivative contract ^F1

(1)This section applies if—^F1

(a)amounts in respect of a qualifying contract are recognised in a company's accounts for an accounting period (“the current period”) as an item of profit or loss even though during all or part of the period the company is not a party to the qualifying contract,^F1

(b)any of conditions A to D is met, and^F1

(c)in the absence of this section, the credits and debits brought into account by the company for the purposes of this Part for the current period would not include credits or debits representing the whole of those amounts.^F1

(2)In this section “qualifying contract” means—^F1

(a)a derivative contract, or^F1

(b)a contract that would be a derivative contract if references in section 576(1) to a company were references to any person.^F1

(3)Condition A is that—^F1

(a)the company was a party to the qualifying contract,^F1

(b)amounts in respect of the qualifying contract were recognised in the company's accounts as an item of profit or loss when it was a party to the contract, and^F1

(c)any amounts in respect of the contract continue to be recognised in those accounts as an item of profit or loss.^F1

(4)Condition B is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a transaction which has the effect of transferring to the company all or part of the risk or reward relating to the qualifying contract without a corresponding transfer of rights or obligations under the contract.^F1

(5)Condition C is that the amounts recognised as mentioned in subsection (1)(a) are recognised as a result of a related transaction in relation to a qualifying contract to which the company was, but has ceased to be, a party.^F1

(6)Condition D is that—^F1

(a)the amounts recognised as mentioned in subsection (1)(a) are recognised because the company may enter into a qualifying contract or related transaction but has not yet done so, and^F1

(b)the amounts are not expenses to which section 607 applies.^F1

(7)The company must bring credits and debits into account for the purposes of this Part for the accounting period as if the company were a party to the qualifying contract for the whole of the accounting period.^F1

(8)The amounts that must be brought into account are those amounts in respect of the qualifying contract that are recognised in the company's accounts for the accounting period as an item of profit or loss (but subject to the provisions of this Part).^F1

(9)This section is subject to sections 607B and 607C.^F1

(10)In this section—^F1

“item of profit or loss” has the meaning it has for accounting purposes;

“recognised” means recognised in accordance with generally accepted accounting practice;

“related transaction”, in relation to a qualifying contract, is to be read as if the references in section 596(1) and (2) to a derivative contract were to a qualifying contract.