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 1.446-3(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 1.446-3(f)(2)(iii)(A), is recognized as interest expense to the payor and interest income to the recipient.