CFM9425 - Taxing forex: matching under Disregard Regulations: meaning of net asset value

How net asset value matching works

This guidance applies to periods of account beginning on or after 1 January 2008

Where a company holds shares in another company (referred to in the legislation as “company A”), and those shares are matched with a liability or derivative contract under condition 2 of regulation 3 or regulation 4, regulation 4A defines “net asset value” in relation to those shares.

It is the value of the assets, less the value of the liabilities that are

• owned by company A itself, or by a direct or indirect subsidiary of A, and
• denominated in the relevant currency (see CFM9426).

“Relevant currency” means the currency giving rise to the foreign exchange risk referred to in regulation 3(3) and regulation 4(3) – the currency to which the company is exposed.

“Subsidiary” should be accorded the meaning that it has for accounting purposes, in other words a subsidiary of company A is any entity (including an unincorporated entity such as a partnership) that is controlled by A.