Part 5Loan Relationships
Chapter 12Special rules for particular kinds of securities
Options etc
420Assumptions where options etc apply
1
This section applies if—
a
the answer to any question specified in subsection (2)—
i
depends on the exercise of an option by a party to a loan relationship (“A”) or A's associate, or
ii
is otherwise under the control of A or A's associate, and
b
an amortised cost basis of accounting applies for an accounting period.
2
The questions are—
a
whether any amount will become due under the relationship after the period ends,
b
how much will become due under it after the period ends, and
c
when after the end of the period an amount will become due under the relationship.
3
In determining the credits and debits to be brought into account for the accounting period in accordance with an amortised cost basis, the assumption in subsection (4) is to be made.
4
The assumption is that A or A's associate will exercise the power to determine whether and on what date any amount will become due in the way which appears to be the most advantageous to A.
5
That way is to be determined—
a
as at the end of the accounting period, and
b
ignoring taxation.