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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Accounting for corporate finance: International Financial Reporting Standards: IAS 39: recognition and derecognition


‘Recognition’ refers to the requirement to recognise all financial assets and liabilities, including derivatives, on an entity’s balance sheet.

A company must recognise a financial asset or financial liability on its balance sheet when, and only when, it becomes a party to the contractual provisions of the instrument.

The application guidance in IAS 39 provides examples of this principle. For example, if a company receives a firm order for goods from a customer, it should delay recognition of the trade debt until at least one of the parties has performed under the agreement - which will normally be when the goods are shipped or delivered.

In contrast, however, a forward contract or option is recognised on the commitment date if it falls within the scope of IAS 39.


‘Derecognition’ means the removal of a previously recognised financial asset or financial liability from the balance sheet. CFM21750 explains de-recognition of a financial asset, and CFM21760 explains de-recognition of a financial liability.

Note on Old UK GAAP

FRS 26 adopted the derecognition requirements of IAS 39 for periods beginning on or after 1 January 2007 (with early adoption permitted). Prior to that date, and where FRS 26 had not been adopted, Old UK GAAP relied upon the derecognition guidance in FRS 5.

Note on New UK GAAP

For those companies that apply FRS 102 within ‘New UK GAAP’ please see CFM23000 onwards.

This guidance is no more than an introduction to this complex area. HMRC staff should consult one of the department’s compliance accountants if they need further details.