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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Accounting for corporate finance: foreign exchange: SSAP 20: speculative currency contracts

This guidance applies to companies which have adopted SSAP 20 under Old UK GAAP.

Currency contracts

Exchange gains and losses arise on a company’s currency contracts, as well as on assets or liabilities.

CFM26090 explains that where a foreign currency asset or liability is hedged by a currency contract, under SSAP20 a company will often account for the asset or liability, and the currency contract, at the rate implied in the contract. This means that no exchange gains or losses arise on the currency contract - see example at CFM26070.

But if a company enters into a currency contract speculatively, it will need to account for the contract on a ‘stand alone’ basis. Companies can also account for currency contracts in this way even where the contract is being used as a hedge. SSAP20 does not prescribe how currency contracts should be treated, and you may see different methods of accounting used.

See CFM26110 for examples of a currency contract being accounted for using:

  • forward rates, or
  • spot rates

See CFM24420, in the Accounting for Derivative Contracts guidance, for more about the accounting treatment of different types of currency contract.

Note on IFRS, New UK GAAP and FRS 23 under Old UK GAAP

For companies adopting IFRS, New UK GAAP or FRS 23 under Old UK GAAP currency contracts will always be accounted for at fair value. It may also be possible that the company designates the contract as a formal hedge and apply hedge accounting (See CFM27000). If you are unsure about the accounting for hedging contracts under IFRS, New UK GAAP or FRS 23, please consult an HMRC Compliance Accountant.