Explanatory note

These Regulations set out the calculations for exchange gain and loss in loan relationships and derivative contracts where the assets and liabilities involved are accounted for using fair value accounting.

Regulation 1 provides for citation, commencement and effect.

Regulation 2 provides for interpretation.

Regulation 3 sets out the application of the term “currency” to these Regulations.

Regulation 4 provides that exchange gain or loss does not include debits or credits referred to in parts of regulation 4 of the Loan Relationships and Derivative Contracts (Change of Accounting Practice) Regulations (S.I. 2004/3271).

Regulations 5 and 6 set out how to calculate exchange gain or loss arising from loan relationship assets and liabilities.

Regulation 7 sets out how to calculate exchange gain and loss arising from derivative contracts.

Regulations 8 and 9 set out how to calculate the residual profit or loss in relation to a loan relationship or derivative contract.

Regulation 9(5) clarifies that residual profits and losses are amounts recognised in determining a company’s profit or loss for the purposes of section 85B(1) of the Finance Act 1996 and paragraph 17(B)(1) of Schedule 26 to the Finance Act 2002.

These Regulations do not impose any new costs on business.