CFM23078 – New UK GAAP: FRS 102: derecognition of financial liabilities – HMRC internal manual

For entities applying FRS 102 with an accounting period beginning on or after January 1, 2015.

Derecognition of a financial liability

A financial liability should only be removed from the balance sheet (i.e. derecognised) when it is extinguished, i.e. when the obligation specified in the contract is either extinguished (for example, when a debt is repaid), canceled (for example, a debt is discharged), or expires (for example, a legal limitation prevents a creditor from pursuing a debt, or a written option expires without being exercised by the holder).

When a debt between an existing borrower and lender is replaced by another with substantially different terms, or there has been a material change in the terms of an existing financial liability, that transaction is accounted for as an extinguishment of the liability. initial financial liability and the recognition of a new financial liability.

The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including non-monetary assets transferred or liabilities assumed – in In other words, the accounting result – must be recognized in profit or loss.


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