CFM50215 - Derivative contracts: accounting conditions: summary

CTA09/S579

In most cases, for a relevant contract to be a derivative contract it must satisfy the accounting conditions at S579.

There are three alternatives to the accounting conditions, only one of which needs to be satisfied. The three alternatives are as follows.

(1) Main accounting condition

The main condition is that the relevant contact is treated for accounting purposes as a derivative (CFM50220).

(2) Extended accounting condition

This is extended in the case of financial assets or liabilities that are not derivatives only because the initial investment is not small (CFM50280).

(3) Contracts with particular underlyings

Certain contracts are deemed to satisfy the accounting conditions by virtue of their underlying subject matter. In particular:

  • All commodity contracts (CFM50240)
  • Contract-for differences over certain underlyings (CFM50270)

Further guidance

CTA09/S587 bypasses the accounting condition, as regards relevant contracts whose underlying subject matter is a holding in an OEIC, unit trust or offshore fund. This has much the same effect as deeming such a contract to satisfy the accounting conditions, see CFM54040.