FRS 26 (IAS 39) Financial Instruments: Recognition and Measurement
Issued December 2004. Effective 1 January 2005 for listed companies and 1 January 2006 for unlisted companies applying the fair value accounting rules.
FRS 26 has been superseded by FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for accounting periods beginning on or after 1 January 2015. For more information visit:
Synopsis
FRS 26 is the equivalent of IAS 39. It requires financial assets (as defined in FRS 25) to be classified as one of:
- Fair value through profit or loss
- Available-for sale
- Held to maturity, or
- Loans and receivables.
Financial liabilities (as defined in FRS 25) must be classified as:
- Fair value through profit or loss, or
- Financial liabilities
Financial assets and liabilities are initially recognised at fair value plus, if not categorised as fair value through profit or loss, transaction costs.
Subsequent measurement depends which of the above categories the financial instrument is classified as. Normally measurement is at fair value or amortised cost.
Financial assets are derecognised when the contractual rights to cash flows from the asset expire, or the asset and associated risks and rewards are transferred.
Financial liabilities are derecognised when the obligation specified in the contract expires, is cancelled or discharged.
FRS 26 also provides guidance on hedge accounting, classifying hedging relationships as one of three types:
- Fair value hedge
- Cash flow hedge
- Hedge of a net investment in a foreign operation.
Last updated 21 June 2015