3.—(1) Regulation 4 applies in either of the circumstances prescribed by paragraphs (2) and (3) below.
(2) The circumstances prescribed by this paragraph are where there is a disposal of an asset by a company and—
(a)any exchange gain or loss arose to the company in relation to the asset in an accounting period beginning on or after 1st October 2002; and
(b)in accordance with generally accepted accounting practice an amount representing the whole or part of an exchange loss or gain which arises to the company in relation to a liability representing a loan relationship of the company or an obligation under a derivative contract—
(i)was carried to or sustained by the reserve mentioned in subsection (5) of section 84A or sub-paragraph (4) of paragraph 16; and
(ii)was set off by or against an amount which represents the whole or part of an exchange gain or loss arising in relation to the asset and falls within subsection (6) of section 84A or sub-paragraph (5) of paragraph 16.
(3) The circumstances prescribed by this paragraph are where there is a disposal of an asset by a company and there is in relation to the asset any of the following—
(a)a deemed disposal under regulation 7(1A) of the 1994 Regulations (as modified by the Exchange Gains and Losses (Transitional Provisions and Savings) Regulations 2002(1));
(b)a deferred gain or loss under regulation 8 of the 1994 Regulations in relation to which paragraph (3) or (4) of that regulation did not apply immediately before the relevant day;
(c)a deferred gain or loss under regulation 9 of the 1994 Regulations in relation to which paragraph (3)(a) or (b) or paragraph (4)(a) or (b) of that regulation, as the case may be, did not apply immediately before the relevant day.
(4) In paragraph (3)(b) and (c) above “the relevant day” means the first day of the company’s first accounting period to begin on or after 1st October 2002.
The relevant modification is contained in regulation 14(3) of S.I. 2002/1969.