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HMRC internal manual

Corporate Finance Manual

Foreign exchange: tax rules on exchange gains and losses: loan relationships and derivative contracts: non-monetary assets

Exchange gains and losses on non-monetary assets do not arise at each accounting date

Only monetary assets and liabilities are translated at each accounting date. Companies translate non-monetary assets and liabilities, such as plant and machinery, on the date of acquisition and do not retranslate them subsequently. The exceptions are investments in foreign subsidiaries. The foreign shareholding may be retranslated if it is matched by a foreign loan and the losses on one offset the gains on the other. There are special rules for exchange gains and losses where matching is used in the accounts. See CFM62000.