CFM24430 - Accounting for corporate finance: derivative contracts: accounting for interest rate swaps held to manage interest rate risk under Old UK GAAP (excluding FRS 26)
You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.
This guidance applies for Old UK GAAP (applied before 2015) where FRS 26 was not applied.
Accounting for interest rate swaps held to manage interest rate risk
Interest rate swaps are contracts under which a periodic series of cashflows will be made or received, calculated by reference to a nominal amount, and defined interest rates. Typically businesses use such contracts to manage risk associated with interest bearing borrowing or investments. For example, a business borrowing money might have a floating rate bank loan, and enter into an interest rate swap to give it certainty over future cashflows in the event of interest rates increasing. Under such a contract:
CFM24200 - Accounting for corporate finance: Derivative contracts: what is a derivative financial instrument
You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.
This guidance applies for IFRS, New UK GAAP and Old UK GAAP (including FRS 26).
Derivative: definition
The relevant accounting standards within the above accounting frameworks all contain definitions of derivatives which are all similar or identical to that in IAS 39, which defines a derivative as a financial instrument or other contract within the scope of IAS 39 with all three of the following characteristics: