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Change of accounting method - example

This guidance applies to periods of account beginning before 1 January 2005

At 31 December 2005 Airgrant Ltd has forward cocoa contracts with a market value of £95,000. »Ê¹ÚÌåÓýappse contracts do not appear on the company’s balance sheet because it has accounted for its derivative contracts on an accruals basis (see CFM84050). »Ê¹ÚÌåÓýapp company changes its accounting policies and accounts for the contracts on a MTM basis from 1 January 2006 onwards. »Ê¹ÚÌåÓýapp 2006 balance sheet will show an opening value for derivative contracts of £95,000 and a corresponding credit taken to retained reserves, probably as a prior year adjustment. FA02/SCH26/PARA15(6) ensures this amount is brought into charge.