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HMRC internal manual

Offshore Funds Manual

Reporting funds: computation of reportable income: adjustments for special classes of income: effective interest income - Regulation 66

If the accounting practice used does not include the effective interest method for calculating interest income (as in IAS 39) then it must either use another method of bringing interest income into account in such a way that the expected gain or loss in value of an interest bearing asset over its life is taken into account as interest (revenue) income or if that is not the case then an adjustment must be made to increase the reportable income over the expected life of the asset by any expected increase in value of the asset (and correspondingly to decrease reportable income by any expected loss over the life of the asset).

The adjustment may be made by any reasonable method providing that it takes into account the full expected gain or loss on the asset and is reasonably comparable to the effective interest method.

This does not prevent it from being less complex than the effective interest method (for example straight line amortisation would be acceptable) providing that it does not consistently reduce the figure reached for reportable income when compared with the effective interest method.