Swaps with significant nonperiodic payments
Swaps with significant nonperiodic payments(A) In general. Except as provided in paragraphs (b)(22)(ii)(B) and (C) of this section, a swap with significant nonperiodic payments is treated as two separate transactions consisting of an on-market, level payment swap and a loan. The loan must be accounted for by the parties to the contract independently of the swap. The time value component associated with the loan, determined in accordance with 1.4463(f)(2)(iii)(A), is recognized as interest expense to the payor and interest income to the recipient.
(A)In general.Except as provided in paragraphs (b)(22)(ii)(B) and (C) of this section, a swap with significant nonperiodic payments is treated as two separate transactions consisting of an on-market, level payment swap and a loan. The loan must be accounted for by the parties to the contract independently of the swap. The time value component associated with the loan, determined in accordance with 1.4463(f)(2)(iii)(A), is recognized as interest expense to the payor and interest income to the recipient.