Section 586 — Corporation Tax Act 2009: Other contracts with embedded derivatives

Other contracts with embedded derivatives 586 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).