Chapter CFM57270

Published date16 April 2016
Record NumberCFM57270

This guidance applies to periods of account starting on or after 1 January 2015 where the company has elected for regulation 7 or 8 to apply.

Events not treated as termination events

The rule described in CFM57210 (that if a company ceases to be a party to a regulation 7 or regulation 8 contract the gains and losses previously excluded are brought into account), does not apply if the hedging contract is immediately rolled over into a new contract and there is still a hedging relationship between the new contract and the original hedged item.

  • A company is committed to buying an asset, denominated in US dollars, in 9 months’ time. It decides to hedge the currency risk from this firm commitment by buying exchange-traded US dollar futures, each contract having a term of three months. As each contract matures, the hedge is rolled over into a fresh contract. The maturity of each contract is not a termination event for the purposes of regulation 10. Fair value changes in the contracts, which are deferred under regulation 7, are...

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