Accounting Standards and Guidance

FRC Financial Reporting Standards (FRSs)

UK/Irish accounting framework (effective for periods beginning on or after 1 Jan 2015)

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

Section 11 Basic Financial Instruments
Introduction to Section 11
11.3A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
11.4[Deleted]
11.5Basic financial instruments within the scope of Section 11 are those that satisfy the conditions in paragraph 11.8. Examples of financial instruments that normally satisfy those conditions include:
 (a)cash;
 (b)demand and fixed-term deposits when the entity is the depositor, eg bank accounts;
 (c)commercial paper and commercial bills held;
 (d)accounts, notes and loans receivable and payable;
 (e)bonds and similar debt instruments;
 (f)investments in non-derivative financial instruments that are equity of the issuer (eg most ordinary shares and certain preference shares); and [AMD 288]
 (g)commitments to receive a loan and commitments to make a loan to another entity that meet the conditions of paragraph 11.8(c).
11.6Examples of financial instruments that do not normally satisfy the conditions in paragraph 11.8, and are therefore within the scope of Section 12, include:
 (a)asset-backed securities, such as collateralised mortgage obligations, repurchase agreements and securitised packages of receivables;
 (b)derivatives, eg options, rights, warrants, futures contracts, forward contracts and interest rate swaps; [AMD 289]
 (c)financial instruments that qualify and are designated as hedging instruments in accordance with the requirements in Section 12; and [AMD 3]
 (d)commitments to make a loan to another entity and commitments to receive a loan, if the commitment can be settled net in cash.
 (e)[deleted]
11.6AThe initial classification of a financial instrument shall take into account the contractual terms including those relating to future variations. Once the classification of a financial instrument is determined at initial recognition, re-assessment is only required subsequently when there has been a modification of contractual terms that is relevant to an assessment of the classification. [AMD 290]
AMD 288

Amendment

Paragraph 11.5(f) amended by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017)

Effective date

01/01/2019

Previous text

(f) investments in non-convertible preference shares and non-puttable ordinary and preference shares; and
AMD 289

Amendment

Paragraph 11.6(b) amended by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017)

Effective date

01/01/2019

Previous text

(b) options, rights, warrants, futures contracts, forward contracts and interest rate swaps that can be settled in cash or by exchanging another financial instrument;
AMD 3

Amendment

Paragraph 11.6(c) amended by FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (issued July 2014)

Effective date

01/01/2015

Previous text

(c) financial instruments that qualify and are designated as hedging instruments in accordance with the requirements in Section 12; and
AMD 290

Amendment

Paragraph 11.6A added by Amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications (issued December 2017)

Effective date

01/01/2019
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