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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Accounting for corporate finance: New UK GAAP

Three new UK accounting standards with a mandatory effective date of accounting periods beginning on or after 1 January 2015 will replace Old UK GAAP (although early adoption is permitted). The new accounting standards are:

  • FRS 100 (Application of financial reporting requirements) sets out the overall framework;
  • FRS 101 (Reduced disclosure framework) sets out the reduced disclosure framework while importing the recognition and measurement principles of IFRS into UK GAAP (with some minor amendments); and
  • FRS 102 (The financial reporting standard applicable in the UK and the Republic of Ireland) sets out in detail the requirements that entities adopting that standard will need to follow.

Therefore FRS 102 is the single new UK GAAP standard, which replaces existing UK standards and abstracts from 1 January 2015. FRS 102 is based on IFRS for SMEs, which is a simplified form of IFRS. As a result, FRS 102 is similar to IFRS in many areas. However, FRS 102 has been amended to comply with company law and to retain some accounting policies that were available under Old UK GAAP.

Sections 11 and 12 of FRS 102 deal with the accounting for financial instruments (including loan relationships and derivative contracts).

However, under FRS 102, a company effectively has three options for accounting for its financial instruments:

  1. Apply Sections 11 and 12 of FRS 102 in full; or
  2. Apply IAS 39 (‘Financial instruments: recognition and measurement’); or
  3. Apply IFRS 9 (‘Financial instruments’).

CFM20035 explains the position under Old UK GAAP.