Exchange gain or loss arising from loan relationship assets or liabilities
5.—(1) Paragraphs (2) and (3) set out the rules for calculating the exchange gain or loss arising from loan relationship assets or liabilities in the following circumstances—
(a)the asset or liability is accounted for at fair value, or
(b)that asset or liability or part of it is a hedged item in a designated fair value hedge and the risk being hedged is or includes exchange risk.
(2) Where paragraph (1) applies and—
(a)an amount is recognised in the company’s profit and loss account or income statement which arises from comparing at different times the fair value of the asset or liability (or in the case of regulation 5(1)(b) any part of it), and
(b)the change in fair value is attributable to any extent to fluctuations in the spot rate of exchange between the currency in which the asset or liability is denominated and the base currency of the company,
the exchange gain or loss is calculated as set out in paragraph (3).
(3) The exchange gain or loss for any accounting period is the change in fair value between the earlier and the later time in that period that is attributable only to fluctuations in the spot rate of exchange between the currency in which the asset or liability is denominated and the base currency of the company.