Raising capital finance
A finance director's guide to financial reporting
Are you considering how to raise new capital finance and use UK GAAP?
Grant Thornton can help you to avoid the pitfalls
In UK GAAP, accounting for the issue of capital instruments used to be a relatively straight forward matter. However since the introduction of FRS 25 'Financial Instruments: Presentation' this area is now full of complexities in terms of whether such instruments are treated as debt or equity. The accounting treatment can in some cases impact on the measurement of debt and can have a significant effect on levels of reported profits. These matters typically arise when entities issue share capital in transactions which have non-standard terms. However, issues also arise in some types of loan arrangements, for example loans which include conversion features.
If you are a director of a company who is thinking about issuing capital finance, then consideration of the accounting impact is important at an early stage in your discussions with your financiers. This will help you avoid any unpleasant surprises. Grant Thornton have produced a book - Raising capital finance - A finance director's guide to financial reporting - as a practical guide to identifying and dealing with the matters to be considered. The guide provides extensive analysis of how to determine how a financial instrument should be accounted for and also discusses any measurement implications of the resulting debt or equity classification. There are many different types of debt instruments that can be challenging to deal with. This guide is a practical tool in assisting you through the key issues which you need to consider when raising new finance for your company.
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