InterpretationI12

1

In these Regulations—

  • “derivative contract” has the same meaning as in Schedule 26 to the Finance Act 2002;

  • “exchange gain or loss” includes, in the case of a derivative contract whose underlying subject matter is currency (and no other subject matter), all fair value profits or losses brought into account in relation to the contract;

  • “fair value accounting” has the meaning given in section 103 of the Finance Act 19963;

  • “fair value profit or loss” means the profit or loss brought into account in relation to a derivative contract or an asset or liability representing a loan relationship where for the period in question fair value accounting is used, and where fair value accounting is used in relation to only part of a contract it means the profit or loss brought into account in relation to that part;

  • “underlying subject matter” has the same meaning as in Schedule 26 to the Finance Act 2002.

2

In these Regulations—

  • “for accounting purposes” means for the purposes of accounts drawn up in accordance with generally accepted accounting practice;

  • “generally accepted accounting practice” has the meaning given in section 50 of the Finance Act 20044; and

  • “amortised cost”, “designated”, “effective hedge”, “effective interest method”, “firm commitment”, “forecast transaction”, “foreign operation” and “net investment in a foreign operation” have the same meaning as for accounting purposes.

3

In these Regulations any reference to an asset which is a ship or aircraft includes a reference to a contract—

a

to which section 67 of the Capital Allowances Act 20015 applies; and

b

which relates to plant or machinery which is a ship or aircraft.

4

In these Regulations—

a

any reference to a hedging instrument includes a reference to part of an instrument; and

b

any reference to a hedged item includes a reference to part of a hedged item.

5

For the purposes of these Regulations, a company has a hedging relationship between a derivative contract or a liability representing a loan relationship on the one hand (“the hedging instrument”) and an asset, liability, receipt or expense on the other (“the hedged item”) if and to the extent that—

a

the hedging instrument and the hedged item are designated by the company as a hedge; or

b

in any other case the hedging instrument is intended to act as a hedge of—

i

the exposure to changes in fair value of a hedged item which is a recognised asset or liability or an unrecognised firm commitment or an identified portion of such an asset, liability or commitment that is attributable to a particular risk and could affect profit or loss of the company;

ii

the exposure to variability in cash flows that is attributable to a particular risk associated with a hedged item that is a recognised asset or liability or a forecast transaction and could affect profit or loss of the company; or

iii

a net investment in a foreign operation of the company.