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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
, see all updates

Old rules: derivative contracts: basic rules pre FA 2004: authorised accruals method

Features of an authorised accruals method

This guidance applies to periods of account beginning before 1 January 2005

FA02/SCH26/PARA17(3) explains what is regarded as the proper provision (see CFM84010) that an accruals basis must contain. It must provide for

  • allocating payments to the accounting period to which they relate (CFM84040+)
  • apportioning payments that relate to two or more periods on a just and reasonable basis
  • assuming (subject to authorised arrangements for bad debt) that every amount payable will be paid in full
  • making appropriate adjustments under the authorised arrangements for bad debt, and
  • ensuring that (again subject to authorised arrangements for bad debt) if the counterparty releases the company from any liability under a derivative contract, the company brings in an appropriate credit in the accounting period in which the release occurs.

Authorised arrangements for bad debt are defined in FA02/SCH26/PARA17(5) as meaning accounting arrangements under which debits and credits are brought into account in a way that meets the requirements of FA02/SCH26/PARA22.