(
CFM17534a explains why both C and D
have a creditor quasi-repo in this case.)
Transaction
As in
CFM17534a:
Treatment of C
| Accounting entries, in accordance with GAAP
In addition to the entries at CFM17534a: |
|
| 1/1/09-30/4/09 (repo “interest”
accrual):
| Dr Financial Asset 2; Cr P&L 2 (the financial asset which has increased to 102 is reduced to nil by receipt of the novation payment on 30/4/09) |
| Net Profit and Loss result: | Credit 2: “interest” |
Tax Treatment
C’s finance return of 2 is treated as interest for loan
relationships purposes (
CFM17544).
Treatment of D
| Accounting entries, in accordance with GAAP
In addition to the entries at CFM17534a: |
|
| 30/4-30/6/09 (repo “interest” accrual):
| Dr Financial Asset 1; Cr P&L 1 (the financial asset which has increased to 103 is reduced to nil by receipt of the repurchase price on 30/6/09) |
| Net Profit and Loss result: | Credit 1: “interest” |
Tax Treatment
D’s finance return of 1 is treated as interest for loan
relationships purposes (
CFM17544).
Further point to note
This transaction corresponds to the debtor
repo example referred to in the footnote to
CFM17528a (if A is a company).