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HMRC internal manual

Corporate Finance Manual

Derivative contracts: departures from accounts: credits and debits in equity

Amounts recognised in equity

CTA09/S605 contains a provision equivalent to the loan relationships rule at CTA09/S321 (see CFM33170). Where a credit or debit on a derivative contract is not recognised in

  • the company’s income statement, profit and loss account or statement of comprehensive income; or
  • its statement of total recognised gains and losses (STRGL), statement of changes in equity (SOCIE) or statement of income and retained earnings; or
  • any similar statement of the company’s profits or losses,

but is instead recognised in equity or shareholders’ funds, the credit or debit is nevertheless brought into account.

This does not over-ride the general rule in CTA09/S595(3) that the credits and debits to be brought into account are those which, taken together, fairly represent the company’s profit or loss on the derivative contract. In practice, it will be rare for a credit or debit that does form part of such a profit or loss to appear in equity or shareholders’ funds, rather than in one of the statements listed in CTA09/S597(1).