Section 584 — Corporation Tax Act 2009: Hybrid derivatives with embedded derivatives

Hybrid derivatives with embedded derivatives 584 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).