CFM20035 - Accounting for corporate finance: Old UK GAAP

The Old UK GAAP framework of standards and abstracts have now been withdrawn as a result of New UK GAAP becoming mandatory for periods beginning on or after 1 January 2015.

For companies applying Old UK GAAP in those earlier periods, the accounting for financial instruments was segregated into those that apply FRS 26 (Financial instruments: measurement) (and related standards) and those that do not.

Old UK GAAP (including FRS 26)

FRS 26 (Financial instruments: recognition and measurement) was aligned to IAS 39 and was mandatory for companies with listed debt or equity that were not using IFRS. It was not mandatory for other entities, although adoption of FRS 26 became necessary as a consequence of taking advantage of the option to use fair value accounting that is part of UK company law.

Old UK GAAP (excluding FRS 26)

For companies not applying FRS 26 there was no specific, comprehensive standard for financial instruments in Old UK GAAP. Instead accounting for financial instruments was primarily determined by the requirements of FRS 4 (issuer of capital instruments), SSAP 20 (foreign currency transactions), FRS 5 (substance over form, recognition/derecognition and specific guidance to certain types of transactions e.g. Application Notes B-E).

Otherwise, for companies not applying FRS 26, the accounting for financial instruments was based largely on the general principles in FRS 18 (Accounting policies), particularly the accruals concept, and relevant provisions of company law. The Companies Act provides that current assets (such as cash and trade debtors) are recognised at purchase price/cost while the accruals concept is applied in determining, for example, the recognition and measurement of interest income in lenders.

Small/Micro Companies

Small companies (as defined by Company law) had the choice as to whether to apply IFRS, Old UK GAAP or the FRSSE. The FRSSE (‘Financial Reporting Standard for Smaller Entities’) contained simplified accounting for small companies. Entities that met the eligibility criteria could prepare and file abbreviated accounts.

For entities which met the definition of ‘micro’, the Micro-Entities’ Accounts Regulations were effective in respect of financial years ending on or after 30 September 2013 for companies filing their accounts on or after 1 December 2013. Companies that met the eligibility criteria could prepare and file abridged accounts.