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The borrower under a debtor repo or debtor quasi-repo is taxed on the income arising on the securities, excluding manufactured payments, as if he continued to hold them for the period during which the arrangement is in force¹. An arrangement is in force from the time the securities are originally sold to the time when the relevant repurchase takes place, or it becomes apparent that the repurchase will not take place².

A charge to tax arises only where GAAP prescribes that income is recognised in determining the borrower's profits and losses for the accounting period. An amount is recognised in determining profits and losses if it is recognised in the company's profit and loss account, income statement, statement of comprehensive income, statement of total recognised gains and losses, statement of recognised income and expense, statement of income and retained earnings, statement of changes in equity or any other statement of items brought into account in calculating the company's profits and losses for the accounting period³.