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HMRC internal manual

Corporate Finance Manual

Old rules: derivative contracts: basic rules pre FA 2004: accruals basis

Accruals basis

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

An authorised accruals basis must allocate payments to the period to which they relate, without regard to

  • when payments are actually made
  • when they are due and payable.

Where the payments relate to more than one period, the apportionment must be just and reasonable. Payments can include premiums and arrangement fees, which should be evenly spread across the life of the instrument. Where a premium is spread across accounting periods, the balance of a premium may be written off in a period before the one to which the contract is to run, if it is seen as valueless with no prospect of recovery.

For an example of accruals accounting for a forward/future contract or an option, see CFM84050.