CFM21510 - Accounting for corporate finance: International Financial Reporting Standards: IAS 39: overview
For those entities applying IFRS or FRS 101 with an accounting period beginning on or after 1 January 2018 refer to IFRS 9 for the recognition and measurement of financial instruments at CFM 21800.
Accounting Approach
Prior to 2005, UK GAAP generally applied the historic cost model to accounting for financial instruments. The key divergence to this was the financial sector, where trading assets and liabilities were marked-to-market, with gains and losses taken through the profit and loss account.
Note that references and guidance in relation to IAS 39 will also apply to those that applied FRS 26 under Old UK GAAP, to those that apply IAS 39 through FRS 101 and to those that apply IAS 39 through the accounting policy choice in FRS 102.
IAS 39
IAS 39 applies fair value accounting more widely to financial instruments, but adopts a 바카라 사이트˜mixed-measurement바카라 사이트™ or hybrid model of accounting.
IAS 39 requires all financial assets and financial liabilities, including derivatives, to be recognised on the balance sheet. They are initially measured at fair value. This may differ from Old UK GAAP (excluding FRS 26), where initial recognition was normally at cost, which is not always the same as fair value.
Subsequent to initial recognition, however, all financial assets are re-measured in various ways according to the category they fall in. Details of these categories are in CFM21520. In many cases the changes resulting from re-measurement are reflected in the income statement, rather than equity.
Income statement
In this context 바카라 사이트˜income statement바카라 사이트™ is equivalent to 바카라 사이트˜Profit and Loss account바카라 사이트™. It refers to the primary statement giving information about the company바카라 사이트™s performance.
Equity
Equity is the residual interest in the assets of the entity after deducting all liabilities. It is equivalent to 바카라 사이트˜shareholders바카라 사이트™ funds바카라 사이트™, though under IFRS it also includes 바카라 사이트˜minority interest바카라 사이트™ (renamed as 바카라 사이트˜non-controlling interest바카라 사이트™ by amendments to IAS 27 in 2008). IAS 1, the standard dealing with the presentation of financial statements, requires entities to present a statement of changes in equity (SOCIE) between two balance sheet dates. (For periods beginning prior to 1 January 2009, this may alternatively be presented as a Statement of Recognised Income and Expense (SORIE)). Where IAS 39 talks about amounts being taken to equity, they will be recognised in the SOCIE or SORIE. It is equivalent to their being reflected in the STRGL (Statement of Total Recognised Gains and Losses), or taken to reserves.