Article G11 Initial and subsequent cost of credit arrangements

(1)

Subject to paragraph (3) below, for the purposes of this Part the initial cost of a credit arrangement is the amount which, at the time the arrangement comes into being, the Authority estimates will be the aggregate of—

(a)

any consideration which falls to be given by the Authority under the arrangement in the financial year in which it comes into being; and

(b)

the value of the consideration falling to be given by the Authority under the arrangement in any subsequent financial year, determined in accordance with paragraph (2) below.

(2)

For each subsequent financial year referred to in paragraph (1)(b) above, the value of the consideration falling to be given in that year shall be determined by the formula—

\frac{x}{{(1 + \frac{r}{100})}^{n}}

where—

“x” is the amount of the consideration which the Authority estimates will be given by it under the arrangement in that financial year;
“r” is the percentage rate of discount prescribed for the financial year in which the arrangement came into being by regulations made by the Secretary of State for the purposes of section 49(2) of the 1989 Act; and
“n” is the financial year in which the consideration falls to be given expressed as a year subsequent to the financial year in which the arrangement came into being (so that the first of the subsequent financial years is 1, the next financial year is 2, and so on).

(3)

Paragraph (2) above does not apply to a credit arrangement of the Authority which is of the same description as a credit arrangement of an authority excluded from subsection (2) of section 49 of the 1989 Act by regulations made by the Secretary of State and, in relation to a credit arrangement which is so excluded, for the purposes of the application of this Part, the provision made in those regulations for the method of calculating the initial cost and the cost of the arrangement at any time shall apply.

(4)

Subject to paragraph (3) above and articles G13 below, the cost of a credit arrangement at any time after it has come into being shall be determined in accordance with paragraphs (1) and (2) above (in like manner as the determination of the initial cost) but on the basis of an estimate made at the time in question and leaving out of account any consideration which has been given by the Authority under the arrangement before that time.

(5)

In the application of this article to a credit arrangement which consists, in whole or in part, of a contract, the consideration under which falls within paragraph (7) of article G10 above,

(a)

if the credit arrangement exists only on the basis of one of the assumptions in that paragraph, the Authority shall make that assumption for the purposes of this article; and

(b)

if the credit arrangement would exist on the basis of any two or more of those assumptions, the Authority shall for the purposes of this article make whichever of those assumptions seems to it most likely.