CFM62740 - Foreign exchange: matching under the Disregard Regulations: meaning of net asset value

How net asset value matching works

Where a company holds shares in another company (referred to in the legislation as ‘company A’), and those shares are matched with a liability or derivative contract under condition 2 of regulation 3 or regulation 4, regulation 4A defines ‘net asset value’ in relation to those shares.

It is the value of the assets, less the value of the liabilities that are

• owned by company A itself, or by a direct or indirect subsidiary of A, and
• denominated in the relevant currency (see CFM62750).

‘Relevant currency’ means the currency giving rise to the foreign exchange risk referred to in regulation 3(3) and regulation 4(3) - the currency to which the company is exposed.

‘Subsidiary’ should be accorded the meaning that it has for accounting purposes, in other words a subsidiary of company A is any entity (including an unincorporated entity such as a partnership) that is controlled by A.