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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: presentation: overview

What IAS 32 covers

IAS 32 deals with the presentation of financial instruments, and includes guidance on the following:

  • the equity/liability split (CFM21220 onwards) with particular reference to:

    • the classification of financial instruments that are in substance liabilities,
    • ‘split accounting’ for compound financial instruments;
    • the classification of derivatives in own shares; and
    • treasury shares (a company’s own shares that it has reacquired).
  • offsetting in the balance sheet of receivables and payables (CFM21300).

For periods commencing prior to 1 January 2007, IAS 32 also included disclosure requirements. For periods commencing on or after 1 January 2007, disclosure requirements are set out in IFRS 7. The disclosure requirements are not normally directly relevant for tax and are not covered in any detail in this manual.

Users of FRS 101 will apply IAS 32 and hence the above will apply to such companies. However they will be able to utilise the disclosure exemptions of FRS 101 as well.

Users of Old UK GAAP will apply FRS 25 which is based on IAS 32 and hence the guidance in this section of the CFM will apply to those who use FRS 25.

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What Section 22 of FRS 102 covers

Section 22 deals with debt and equity. The requirements of Section 22 are similar to those of IAS 32.

In particular it addresses the following:

  • the equity/liability split (CFM21220 onwards) with particular reference to:

    • the classification of financial instruments that are in substance liabilities,
    • ‘split accounting’ for compound financial instruments;
    • the classification of derivatives in own shares; and
    • treasury shares (a company’s own shares that it has reacquired).

Offsetting (CFM21300) in not addressed by Section 22 of FRS 102, but is instead covered by Section 11 and 12.