Modifications etc. (not altering text)
C1Sch. 26 modified by 1996 c. 8, s. 86(3C) (as inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by 2002 c. 23, s. 82, Sch. 25 Pt. 1 para. 6(3))
C2Sch. 26 extended (retrospective to 30.9.2002) by Finance Act 2003 (c. 14), s. 177(4)(8)(11)
18(1)This paragraph has effect, subject to the following provisions of this Schedule, for the determination of which of the alternative authorised accounting methods that are available by virtue of paragraph 17 is to be used as respects the derivative contracts of a company.
(2)Different methods may be used as respects different derivative contracts or, as respects the same derivative contract, for different accounting periods or different parts of the same accounting period.
(3)If a basis of accounting which is or equates with an authorised accounting method is used as respects any derivative contract of a company in a company’s statutory accounts, then the method which is to be used for the purposes of this Schedule as respects that contract for the accounting period, or part of a period, for which that basis is used in those accounts shall be—
(a)where the basis used in those accounts is an authorised accounting method, that method; and
(b)where it is not, the authorised accounting method to which it equates;
but this sub-paragraph is subject to paragraphs 19 to 21.
(4)For any period or part of a period for which the authorised accounting method to be used as respects a derivative contract of a company is not—
(a)the method determined under sub-paragraph (3),
(b)an authorised mark to market basis of accounting in accordance with an election under paragraph 19, or
(c)an authorised mark to market basis of accounting in accordance with paragraph 20 or 21,
an authorised accruals basis of accounting shall be used for the purposes of this Schedule as respects that derivative contract.
(5)For the purposes of this paragraph (but subject to sub-paragraph (6))—
(a)a basis of accounting equates with an authorised accruals basis of accounting if it purports to allocate payments under a derivative contract to accounting periods according to when they are taken to accrue; and
(b)a basis of accounting equates with an authorised mark to market basis of accounting if it purports in respect of a derivative contract—
(i)to produce credits or debits computed by reference to the determination, as at different times in an accounting period, of a fair value; and
(ii)to produce credits or debits relating to payments under that derivative contract according to when they become due and payable.
(6)An accounting method which purports to make any such allocation of payments under a derivative contract as is mentioned in sub-paragraph (5)(a) shall be taken for the purposes of this paragraph to equate with an authorised mark to market basis of accounting (rather than with an authorised accruals basis of accounting) if—
(a)it purports to bring that derivative contract into account in each accounting period at a value which would be fair value if the valuation were made on the basis that any periodic payments falling to be made under the contract were to be disregarded to the extent that they have already accrued; and
(b)the credits and debits produced in the case of that contract by that method (when it is properly applied) correspond, for all practical purposes, to the credits and debits produced in the case of that contract, and for the same accounting period, by an authorised mark to market basis of accounting.