½Û×ÓÊÓƵ

In certain cases where a company enters into a derivative contract whose underlying subject matter consists wholly of currency (currency contract) to hedge a forecast transaction or a firm commitment, any fair value profits or losses arising on the currency contract will be ignored for the purposes of the derivative contracts legislation in the accounting period in which they are reflected in the company's accounts. Instead, very broadly, any profits or losses arising in respect of the currency contract and any transitional adjustments arising in respect of that contract¹ will be recognised for tax purposes on the same basis as profits and losses arising in respect of the hedged item are reflected in the company's accounts, or if earlier when the company ceases to be a party to the derivative contract². This is considered further at D1.860.

Where only part of a currency contract is used as a hedge, the Disregard Regulations³ applies to the fair value profits and losses and any transitional adjustments arising on