FAQs
Under FRS 102, financial instruments are classified as either 'basic' or 'non-basic' which can determine whether an instrument is measured at cost or fair value.
What are the basics of FRS 102? ›
FRS 102 divides financial instruments into basic and other. Basic financial statements, such as trade creditors, trade debtors and basic bank loans, are stated at amortised cost. However, for short term items discounting is not applied and they will be stated at the amount of cash expected to be paid.
What are financial instruments FRS 102? ›
A financial instrument is a contract that gives rise to a financial asset in one entity and a financial liability or equity instrument of another entity. Common financial instruments would include cash, trade debtors and interest rate swaps.
What are the three types of debt instruments? ›
Debt instruments are contracts repayable with interest; types include bonds, debentures, T-bills. Different risks linked with investing in bonds include price volatility and credit risk. Credit ratings indicate default probability.
Who does FRS 102 apply to? ›
FRS 102 is based on the principles found in IFRS Standards, specifically IFRS for SMEs. IFRS for SMEs is intended to apply to general-purpose financial statements by entities that are classed as 'small and medium-sized' or 'private' and 'non-publicly accountable'.
When can I use FRS 102? ›
FRS 102 applies to general-purpose financial statements and the financial reporting of entities including those that are not constituted as companies and those that are not profit-oriented. FRS 102 applies to the financial statements of entities that are not applying EU-adopted IFRS, FRS 101 or FRS 105.
How do you classify financial instruments? ›
Financial instruments may be divided into two types: cash and derivatives. They also are categorized by asset class, which depends on whether they are debt-based or equity-based. Foreign exchange instruments comprise a third, unique type of financial instrument.
What are the basic financial instruments examples? ›
Examples are deposits held in banks, trade receivables and payables, bank loans, loan assets and other loans purchased in a market. Such a debt instrument is a financial asset of the entity that is owed the debt and a financial liability of the entity that is required to pay the debt.
What can be Capitalised under FRS 102? ›
If the expenditure “provides incremental future benefits” (FRS 102 paragraph 17.6), that is, it improves the earning capacity or extends the life of the non-current asset then it is capital expenditure.
What are non-debt instruments? ›
1 Non-debt instruments' have been defined in the Non-Debt Instrument Rules to mean: 1. all investments in equity instruments in incorporated entities: public, private, listed and unlisted; 2.
Bonds are the most common debt instrument. Bonds are created through a contract known as a bond indenture. They are fixed-income securities that are contractually obligated to provide a series of interest payments of a fixed amount and also repayment of the principal amount at maturity.
What is the definition of a business FRS 102? ›
A business combination is defined in FRS 102:19.3 as 'the bringing together of separate entities or businesses into one reporting entity'. This can take a range of forms, including the acquisition of shares, purchase of net assets, assumption of liabilities, or purchase of a group of assets constituting a business.
Is FRS 102 the same as US GAAP? ›
There remain substantial differences between FRS 102 and US GAAP, and these are exacerbated by the decision of the FRC not to include any changes in respect of IFRSs 9,15 & 16 into FRS 102 as part of the First Triennial Review.
What is the definition of a provision FRS 102? ›
The Glossary to FRS 102 defines a 'provision' as: A liability of uncertain timing or amount.
What is the difference between FRS 101 and 102? ›
FRS 101 may only be applied by qualifying entities which are members of a group where the parent of that group prepares publicly available consolidated financial statements. All entities can choose to report under FRS 102 except those required to apply UK-adopted International accounting standards.