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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Accounting for corporate finance: key concepts: financial instruments that are ‘outside the scope’

What financial instruments are outside the scope of IAS 32 and IAS 39

IAS 32, IAS 39 and IFRS 7 apply to all financial instruments, with the following principal exceptions:

Interests in subsidiaries, associates, and joint ventures See IAS 27 (‘Consolidated and Separate Financial Statements (revised 2008)’, IAS 28 (‘Investments in Associates’), and IAS 31 (‘Interests in Joint Ventures’) and IFRS 10, unless these state that IAS 39 applies or can apply, in which the case the requirements of IAS 32 and IFRS 7 also apply.
   
Employee benefits plans See IAS 19 (‘Employee Benefits’)
Leases See IAS 17 ‘Leases’. However, IAS 39 applies to:
  • lessor’s lease receivables with respect to derecognition and impairment provisions;
  • lessee’s finance lease payables with respect to derecognition provisions; and
  • derivatives embedded in leases.
In respect of leases, the disclosure provisions of IAS 32 or IFRS 7 apply as well as those in IAS 17.    
  Business combinations IAS 39 does not apply to contracts between an acquirer and a vendor to buy or sell an acquiree at a future date.
  Insurance contracts, defined at IFRS 4 IAS 39 applies, however, to derivatives embedded in insurance contracts unless they are themselves within the scope of IFRS 4. If IAS 39 applies, then so do IAS 32 and IFRS 7.
  Financial guarantee contracts Excluded if falling within scope of IFRS 4. Included if linked to an ‘underlying’, for example, credit derivatives. Disclosure provisions in IAS 32 or IFRS 7 apply other than to those contracts falling within IFRS 4.
  Financial instruments, contracts and obligations under share-based payment transactions under IFRS 2 Except (a) where IAS 32 applies to treasury shares that are part of a share-based payment arrangement (see CFM21220) and (b) those classed as derivatives.
  Reimbursement of amounts for which the entity recognises a provision in accordance with IAS 37  

For FRS 101 users the scope exclusions noted above also apply.

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FRS 102: Financial instruments that are outside the scope of Sections 11 and 12

For users of FRS 102 similar scope exclusions apply. A full list of the exclusions under FRS 102 is provided in paragraph 11.7 of FRS 102.