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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Derivative contracts: departures from accounts: changes of accounting policy

Adjustments on change of accounting policy

CTA09/S613 - 615 contains provisions to ensure that amounts relating to derivative contracts do not drop out of account when a company changes its accounting policy. These largely mirror the loan relationships provisions at CTA09/S315 - 318.

The rule applies in particular where a company adopts IFRS for the first time. But it is not confined to this instance - it will apply whenever a company changes its accounting policy between the end of one period of account and the start of the next.

In many cases, the change of accounting policy will give rise to a prior period adjustment which (in so far as it relates to derivative contracts) will be taxable under CTA09/S597(2) (see CFM51040). CTA09/S614 deals specifically with those cases where there is an increase or decrease in the value of a derivative contract between the end of one period of account and the beginning of the next, without any credit or debit being brought into account.

There is more detailed guidance on the loan relationships and derivative contracts provisions about changes of accounting policy at CFM76000. Although this is presented in terms of first-time adoption of IFRS, it applies to changes of accounting policy generally.