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Accounting for client money

Teerasak Chuasrisakul

Our latest IFRS Viewpoint looks at the challenging situation of Accounting for client money. [ 136 kb ]

The term ‘client money’ is used to describe a variety of arrangements in which the reporting entity holds funds on behalf of clients. Our view is that entities should recognise client money as an asset (and an associated liability) if the general definition of an asset contained in the Conceptual Framework for Financial Reporting (2018) is met.

The definition of an asset 

The Conceptual Framework for Financial Reporting (2018) defines an asset as 'a present economic resource controlled by the entity as a result of past events', with an economic resource being defined as 'a right that has the potential to produce economic benefits'.

Determining whether the definition is met

Determining whether this definition is met requires a careful analysis of the contractual terms and conditions and economic substance of the arrangements for holding client money to determine whether the client money:

  • is a resource controlled by the reporting entity
  • confers a right that has the potential to produce economic benefits to the reporting entity.

The implications of meeting the definition

If both conditions apply, the client money should be recognised as an asset of the reporting entity. This determination may involve significant judgement in which case appropriate disclosures should be made in accordance with IAS 1 ‘Presentation of Financial Statements’.

If a client money arrangement results in recognising cash at a bank as an asset and an associated liability to a client, it will not be appropriate to offset those items in most circumstances.

Want to know more? Download the full Viewpoint for further infomation [ 136 kb ].

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