Part 7Derivative contracts
Chapter 2Contracts to which this Part applies
Cases where companies treated as parties to relevant contracts
586Other contracts with embedded derivatives
1
This section applies if a company—
a
is a party to a contract which is neither a hybrid derivative nor a loan relationship, and
b
in accordance with generally accepted accounting practice, 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.
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
b
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.
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 embedded derivative would be.
4
See also section 616 (disapplication of fair value accounting for certain embedded derivatives).