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HMRC internal manual

Corporate Finance Manual

Accounting for corporate finance: Old UK GAAP excluding FRS 26: lenders: accrual accounting: balance sheet assets

The following guidance covers Old UK GAAP (applied before 2015) where FRS 26 was not applied.

Balance sheet: timing

The lender will first record the loan as an asset in its balance sheet when it meets the definition of an asset within FRS 5, i.e. when the lender establishes ‘rights or other access to future economic benefits as a result of past transactions or events.’

This means that where a company has entered into a loan arrangement and advanced the money, it will record a loan as an asset.


On 1 December 2008 Company A lends £10,000 to Company B. The book-keeping in Company A’s books would be:

  Debit Credit
  £ £
Loan with Company B 10,000  
Cash at Bank   10,000

At its balance sheet date, unless the loan was repaid, it would be shown as an asset.

When the loan is repaid, the bookkeeping will be the opposite of the above, i.e.

  Debit Credit
  £ £
Cash at Bank 10,000  
Loan with Company B   10,000

This should be contrasted with the position where the company merely gives a right to an agreed facility to draw down money. In this circumstance it will not record an asset until amounts are drawn down. Similarly, where a company enters into an agreement to receive a loan instrument in consideration of an event (e.g. sale of a business, or a funding transaction) but has not done so at the balance sheet date, it will not record a loan asset at that date.