Part 7Derivative contracts
Chapter 2Contracts to which this Part applies
Cases where companies treated as parties to relevant contracts
584Hybrid derivatives with embedded derivatives
1
This section applies if—
a
a company is a party to a relevant contract which meets the condition in section 579(1)(b) or (c) (contracts not treated for accounting purposes as derivatives),
b
in accordance with generally accepted accounting practice, the company treats the rights and liabilities under the contract as divided between—
i
rights and liabilities under one or more derivatives (“embedded derivatives”), and
ii
the remaining rights and liabilities, and
c
a contract consisting of only those remaining rights and liabilities would be a relevant contract.
2
The company is treated for the purposes of this Part—
a
as a party to a relevant contract whose rights and liabilities consist only of those of the embedded derivative, or (if there is more than one embedded derivative) as a party to relevant contracts each of whose rights and liabilities consist only of those of one of the embedded derivatives, and
b
as a party to a relevant contract whose rights and liabilities are those within subsection (1)(b)(ii).
3
Each relevant contract to which a company is treated as a party under subsection (2) is treated for the purposes of this Part as an option, a future or a contract for differences depending on what the character of a separate contract containing the rights and liabilities of the deemed relevant contract would be.
4
In this Part “hybrid derivative” means a relevant contract within subsection (1)(a).
5
See also—
a
section 592 (embedded derivatives treated as meeting condition in section 591 etc), and
b
section 616 (disapplication of fair value accounting for certain embedded derivatives).