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CFM20010 - Accounting for corporate finance: overview of guidance


This part of the guidance is intended to give HMRC staff an overview of the way corporate finance transactions may be presented in company accounts. However, HMRC staff should always first ask the advice of a local advisory accountant if the treatment of a corporate finance transaction in the accounts is not clear.

There currently exists a suite of accounting standards in the UK. Subject to certain restrictions detailed in the respective standards themselves, entities may choose or may be required to prepare their accounts under one of the following:

1) EU-endorsed IFRS: Those accounts prepared in accordance with the International Financial Reporting Standards and the International Accounting Standards within the meaning of s395 of the Companies Act. Hereafter ‘IFRS’ for the purposes of the CFM.

2) New UK GAAP: Entities applying New UK GAAP will, within the framework of FRS 100, apply one of FRS 101, FRS 102 or FRS 105.

  • FRS 101 is effectively the recognition and measurement requirements of IFRS subject to some adjustments to ensure alignment with the UK Companies Act and also reduced disclosure requirements.
  • FRS 102 is a new single standard which is closely aligned to, but is not the same as, IFRS. FRS 103 and FRS 104 cover specific issues for FRS 102 users (Insurance Contracts and Interim Financial Reporting respectively).
  • FRS 105 is for those entities that meet the eligibility criteria of a micro entity and is based on FRS 102 with simplified accounting requirements.

Hereafter ‘New UK GAAP’ for the purposes of the CFM, unless the context indicates otherwise.

3) Old UK GAAP: Substantively the FRSs’, SSAPs’, UITFs’ and relevant accepted practice in existence and applied prior to the introduction of New UK GAAP. Entities that applied Old UK GAAP fell into two main camps - those applying FRS 26 (and related standards) and those that do not. For the purposes of the CFM, this is described as ‘Old UK GAAP (including FRS 26)’ and ‘Old UK GAAP (excluding FRS 26)’ respectively. Old UK GAAP was withdrawn for companies with accounting periods beginning on or after 1 January 2015.

4) FRSSE: The Financial Reporting Standard for Smaller Entities. Entities that meet the eligibility criteria may prepare and file abbreviated accounts. The FRSSE was withdrawn for companies with accounting periods beginning on or after 1 January 2016.

Guidance on IFRS is given in CFM20020. Guidance on New UK GAAP is at CFM20030 with Old UK GAAP and the FRSSE located at CFM20035.


Although the tax rules for loan relationships and derivative contracts broadly follow the accounting treatment, they are prescriptive in many areas about how accounting methods should be applied, and override the accounting treatment in other areas.