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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Accounting for corporate finance: key concepts: overview

There now exist a number of different accounting standards that govern the accounting for financial instruments - potentially 11 different permutations under IFRS, New UK GAAP, Old UK GAAP, together with the FRSSE and the accounting for Mircos.

Fortunately, there are a number of similarities between the standards. This section explains the common areas. In particular, it covers:

  • Key concepts (CFM21030): IFRS, New UK GAAP and FRS 26 under Old UK GAAP share similar definitions and key concepts.
  • Liabilities and equity (CFM21200): All the main accounting standards share similar rules governing whether a particular instrument should be classified as a liability, as equity or as containing both liability and equity components (‘compound instruments’).
  • Offsetting (CFM21300): All the main accounting standards share similar rules governing whether asset and liability balances can be offset.

Differences exist however with the rules which govern ‘classification and measurement’. Therefore there are separate sections on this for the respective standards:

  • IAS 39 (CFM21500). Note that the same rules also apply where IAS 39 is used under FRS 101 or FRS 102 and where FRS 26 is used under Old UK GAAP.
  • Old UK GAAP (excluding FRS 26) (CFM22000).
  • Sections 11 and 12 of FRS 102 (CFM23000).

More detailed guidance explains the accounting rules in particular areas. The specific topics covered are:

  • Accounting for derivative contracts (CFM24000)
  • Accounting for hybrid debt (CFM25000)
  • Accounting for foreign exchange (CFM26000)
  • Accounting for hedging (CFM27000)