Commentary on Sections Overview Chapter 3: Credits and debits to be brought into account: general Section 608: Company ceasing to be party to derivative contract
1643.This section brings into account amounts recognised in accounts in respect of a derivative contract after the accounting period in which the company ceases to be a party to that contract. It is based on paragraph 53(3), (4), (5) and (6) of Schedule 26 to FA 2002.
1644.The accounting policies of a company may treat part of the profit or loss in respect of a contract as deferred income or loss to be brought into account in accounting periods later than that in which the company ceased to be a party to the contract. This section identifies amounts to be treated as credits and debits in subsequent periods until all the deferred income or loss has been brought into account under this Part.
1645.Subsections (3) to (6) set out how certain conditions in this Part may be treated as satisfied in respect of the former derivative contract. Those are conditions that may need to be satisfied for a particular provision to apply in respect of post-cessation credits or debits. For examples of the conditions to which subsection (3) or (5) may apply, see sections 573 and 690.
1646.Subsection (7) makes clear that the deeming effect of subsections (3) to (6) carries through for any question of what a company’s derivative contracts are or whether a company is a party to a derivative contract (see section 578).