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Financial instruments under new UK GAAP

Sections 11 and 12 of the accounting standard FRS 102 covers basic financial instruments and other financial instruments issues. On this page you can access a range of articles, books and online resources providing useful links to the standard, summaries, guidance and news of recent developments.

General guidance and information on the accounting standard is available from our FRS 102 page.

Basic financial instruments were dealt with in FRS 4 under old UK GAAP. This standard has been superseded by FRS 102.

What's on this page?

  • Full-text standard
  • Model accounts
  • Guidance and support from ICAEW
  • eBooks
  • Guides
  • Online articles
  • Articles and books from the Library

Contact the Library

Expert help for your enquiries and research.

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Full-text standard

FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland
As issued by the Financial Reporting Council (FRC) in September 2015. This updated edition incorporates amendments issued in September 2014, February 2015, March 2015 and July 2015. Basic financial instruments are covered in Section 11 and other financial instruments issues are covered in Section 12.

Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Basic financial instruments and Hedge accounting
Amendment issued by the FRC in July 2014 making changes to Sections 1, 11, 12, 13 and 35 of FRS 102.

More information and links to previous versions and amendments are available on our main FRS 102 page.

Model accounts

Model accounts and disclosure checklists for new UK GAAP
The ICAEW Library can provide model accounts and disclosure checklists for FRS 101, FRS 102, FRS 102 Section 1A, FRS 103 and FRS 105. The examples and checklists cover a broad range of entities, including small companies, charities, groups, LLPs and micro-companies.

ICAEW guidance and support

The new UK GAAP
ICAEW's financial reporting portal offering practical resources on the new regime, including guidance factsheets and FAQs covering key topics.

Loans from director-shareholders under the new UK GAAP
FAQ from the Financial Reporting Faculty commenting on further questions and concerns raised by members about accounting for loans from directors who are also shareholders of the company, primarily in the context of small companies required to apply FRS 102 for accounting periods starting on or after 1 January 2016. Published in September 2016.

Accounting for directors' loans under FRS 102
FAQ produced by the Financial Reporting Faculty commenting on some of the questions raised by members about accounting for directors' loans, with worked examples. Updated in July 2016.

FRS 102: Intercompany loans at non-market rates
This helpsheet addresses some of the questions raised with ICAEW's Technical Enquiry Service regarding the accounting treatment of intercompany loans which are provided interest free or at below-market interest rates. Published in May 2015. 

John Selwood's Q&As on financial instruments under new UK GAAP
Questions and answers on intercompany loans and audit evidence under FRS 102. Published in Audit and Beyond in February 2015.

FRS 102: Financial instruments
Factsheet providing a summary of what is likely to be one of the biggest challenges for many entities as they seek to apply the new standard. Published in December 2014.

Ask ICAEW Technical Advisory Service

Get an opinion from the experts. Our experienced technical advisors can help you with your new UK GAAP questions and offer practical advice. Call the advisory helpline on +44 (0)1908 248 250.

Questions we've dealt with recently include:

  • How do I know if my financial instruments are basic or other under FRS 102?
  • How do I account for intercompany loans under FRS 102?
  • When do I have to apply FRS 102 to my UK company client?
  • How does FRS 102 impact charities?

Find out more about the Technical and ethics advisory helpline, including our opening hours.

Financial Reporting Faculty

Financial Reporting Faculty
The faculty offers assistance and support in IFRS, UK GAAP and other aspects of business reporting. It offers technical briefings and factsheets, IFRS and UK GAAP standards-trackers, plus practical advice from industry experts and working accountants.

eBooks

The Library provides full text access to a selection of key business and reference eBooks from leading publishers. eBooks are available to logged-in ICAEW members, ACA students and other entitled users. If you are unable to access an eBook, please see our Help and support advice or contact library@icaew.com.

Interpretation and application of UK GAAP for accounting periods commencing on or after 1 January 2015
Steve Collings (2015)
A detailed, practical guide to applying UK GAAP with specific sections and examples covering:

  • Financial instruments
  • Basic financial instruments
    Includes discussion of conditions, recognition and measurement, amortised cost, measured cost, fair value, investments in shares, valuation techniques and impairment with examples.
  • Derecognition of basic financial instruments
    Includes discussion of financial assets and financial liabilities with examples.
  • Other financial instruments issues
  • Hedge accounting
    Includes discussion of fair value hedge, cash flow hedge, hedge of net investment in a foreign operation and discontinuation of hedge accounting with examples.
  • Disclosure requirements: Financial instruments
  • Disclosure requirements: Hedge accounting.

UK GAAP financial statement disclosures manual
Steve Collings (2016)
A practical manual for preparing new UK GAAP-compliant disclosures. This guide collects all of the latest guidelines into one place and is designed for practical application with many real-world examples. The chapter on financial instruments covers:

  • Types of basic financial instruments
  • Presentation of financial instruments under UK GAAP
  • Disclosure requirements
    Including defaults and breaches, derecognition issues, financial instruments pledged as collateral, financial instruments measured at fair value through profit or loss.
  • Companies Act disclosure requirements
  • Hedge accounting
  • Micro-entities.

UK GAAP 2017: Application of FRS 100–104 in the UK
EY (2017)
This guide has been fully updated to reflect the application of the new accounting standard in practice. It focuses on each area of the financial statement in detail and explains how they are treated by FRS 102, with illustrative examples. The chapter on financial instruments covers:

  • Comparison between Sections 11, 12, 22 and IFRS
  • Scope of Sections 11, 12 and 22
  • Recognition and measurement: Accounting policy choice
  • Financial liabilities and equity
  • Classification
  • Initial recognition and measurement
  • Subsequent measurement
  • Derecognition
  • Hedge accounting
  • Presentation and disclosures
  • Summary of GAAP differences.

Guides

Some guides and comparisons that we link to may pre-date the latest amendments to this standard. While these resources contain useful information, please treat them with appropriate caution.

Fact Sheet 4 – FRS 102: Financial Instruments
FRC, December 2018
Staff factsheet providing a summary of key FRS 102 requirements relating to financial instruments. It deals with accounting policy choice and scope, classification, initial and subsequent measurement, detailed guidance on financing transactions, impairment, derecognition, and disclosures.

Staff Education Note 2: Debt instruments – Amortised cost
FRC, October 2015
Guidance note produced by the FRC that discusses amortised cost measurement requirements in FRS 102 and highlights key differences between FRS 4 and FRS 102. Updated in October 2015.

Staff Education Note 16: Financing transactions
FRC, October 2015
Guidance note produced by the FRC discussing initial and subsequent measurement of financing transactions, with examples. It also highlights key differences between FRS 4, FRS 5 and FRS 102. Updated in October 2015.

HMRC directors' loan accounts toolkit
Guidance for tax agents and advisers on directors' loan accounts in Company Tax Returns, updated by HMRC in June 2016 to reflect changes to UK GAAP.

Achieving hedge accounting in practice
In-depth guide from PwC, published in October 2016, on hedging under FRS 102 and the issues affecting non-financial institutions.

Tax issues for financial instruments under new UK GAAP – Part 2 
Business Edge bulletin from BDO, published in April 2014, looking at first-time adoption adjustments and disregard regulations.

Tax issues for financial instruments under new UK GAAP – Part 1 
Business Edge bulletin from BDO, published in March 2014, examining fair value movements.

Changes to debt instruments accounting under FRS 102 
Business Edge bulletin from BDO, published in March 2014, summarising proposed amendments to broaden the definition of basic financial instruments and to bring measurement requirements closer to IFRS 9.

Debt instruments under FRS 102 
Business Edge bulletin from BDO, published in October 2013, outlining issues in defining basic and non-basic financial instruments.

Financial Reporting Standard 102: Financial instruments 
Factsheet produced by Crowe Clark Whitehill reviewing the changes to accounting for financial instruments. Published in September 2013.

Online articles

The Library provides access to leading business, finance and management journals. These journals are available to logged-in ICAEW members, ACA students and other entitled users subject to suppliers' terms of use.

Articles are available to logged-in ICAEW members, ACA students and other entitled users.

Articles from other sources

Small business accounts: Financial instruments - part 4
CCH Daily, March 2017
This article considers potential pitfalls when reporting and accounting for director's loans, fixed asset invements and derivatives under new UK GAAP, with tips and advice for smaller businesses considering adopting FRS 105. It looks at identifying financial instruments, intercompany loans, market rate of interest, transition adjustments, and the micro entity regime. Available online to Accountancy Daily subscribers or in print from the Library.

FRS 102: Financial instruments and liabilities - tips and advice
CCH Daily, October 2016
Helen Lloyd FCA unravels FRS 102 and accounting for financial instruments and accounting for share issues, warning that there are substantial variations on old UK GAAP so parts of this will be unfamiliar for companies making the transition to FRS 102. Available online to Accountancy Daily subscribers or in print from the Library.

UK GAAP choices: Accounting for financial instruments - part 5
CCH Daily, February 2016
Part five of a series on UK GAAP transition, this article considers the thorny issue of financial instruments and how to deal with them under the new accounting framework. Free registration is required to view this article. Available online to Accountancy Daily subscribers or in print from the Library.

Director's loan accounts under FRS 102: Tax implications
CCH Daily, June 2015
Taxing debt will now be largely driven by the FRS 102 requirements for financial instruments, according to this article, which unpicks the tax implications of the new accounting framework and the impact on director's loan accounts and various loan relationships (LR). Available online to Accountancy Daily subscribers or in print from the Library.

Accounting for derivatives under FRS 102
AccountingWEB, June 2015
In-depth article, with examples, discussing what derivative financial instruments are and how they should be recognised on the balance sheet under FRS 102.

FRS 102: Intra-group loans
AccountingWEB, April 2015
Detailed article with examples examining the complexities of intra-group loans under sections on FRS 102.

FRS 102: Basic financial instruments
AccountingWEB, October 2014
Detailed article from by Steve Collings with illustrative examples examining the classification of financial instruments.

Financial instruments under FRS 102
CCH Daily, October 2013
The article considers the definitions of ‘financial asset’ and ‘derivative’ to illustrate that accountants are likely to be affected by the requirements for financial instruments under the new FRS 102 UK GAAP standard. It outlines the practical implications for firms and clients where derivatives are recognised in the accounts at fair value with changes through profit and loss. Available online to Accountancy Daily subscribers or in print from the Library.

FRS 102: Part 3 - Forward contracts
CCH Daily, October 2013
Third in a series of articles exploring key areas where FRS 102 has significant differences from current UK GAAP. It considers the treatment of forward contracts and risk management instruments and includes a worked example contrasting the current GAAP and the FRS 102 approaches. Available online to Accountancy Daily subscribers or in print from the Library.

FRS 102: Part 2 - Bank debt
CCH Daily, August 2013
Second in a series of articles exploring where FRS 102 differs from current UK GAAP. The author discusses accounting for unusual terms in bank debt under the new standard, covering embedded derivatives, and offers advice on how to apply this part of the standard properly. Available online to Accountancy Daily subscribers or in print from the Library.

FRS 102: Part 1 - Intercompany loans 
CCH Daily, July 2013
First in a series of articles exploring key areas where FRS 102 has significant differences from current UK GAAP. The article considers the requirements, mechanics and difficulties of accounting for intercompany loans and summarises the exemptions and alternatives available. Available online to Accountancy Daily subscribers or in print from the Library.

Articles and books in the Library collection

To find out how you can borrow books from the Library please see our guide to book loans. You can obtain copies of articles or extracts of books and reports by post, fax or email through our document supply service.

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