The condition is that the underlying subject matter of the derivative contract is such that the company could, by entering into that contract, reasonably expect to eliminate or substantially reduce the economic risk of holding the asset, or part of the asset, which is attributable to fluctuations in exchange rates.
(4) If condition 3 applies, a derivative contract is matched with an asset only to the extent that the carrying value of the derivative contract at the time when the contract is entered into does not exceed the unmatched carrying value of the asset at that time.
(5) In this regulation—
“carrying value” means, in relation to a derivative contract, the value as shown in the company’s accounts of that contract; and
“unmatched carrying value” means, in relation to an asset, an amount equal to the value as shown in the company’s accounts to the extent that that amount has not previously been matched in accordance with this regulation or regulation 3.