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Accounting treatment for ASA held over year end

What is the correct double entry for an Advanced Subscription Agreement

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What is the correct double entry for an Advanced Subscription Agreement where the agreement is signed and cash received, but shares have not yet been issued at year end? Micro company, funds received a month prior to year end (March) and the latest shares will be issued is August. This particular ASA is for a fixed amount of shares at a fixed valuation. This is definitely not a loan and as a carefully constructed ASA is SEIS compliant, but is it equity or a liability in accounting terms? I have these two pertinent pieces from FRS102 but would be good to hear from anyone who has accounted for ASA's before:


From FRS 102:

Classification of an instrument as liability or equity

Sec 22.3 

A financial liability is any liability that is: 

..... b) a contract that will or may be settled in the entity’s own equity instruments and:

.........(ii) which will ....... be settled other than by the exchange of a fixed amount of  cash or another financial asset for a fixed number of the entity’s own equity instruments.

HOWEVER, also from FRS102:

Original issue of shares or other equity instruments 

22.7 An entity shall recognise the issue of shares or other equity instruments as equity  when it issues those instruments and another party is obliged to provide cash or other resources to the entity in exchange for the instruments. 

(a) [Not used]

(b) If the entity receives the cash or other resources before the equity instruments  are issued, and the entity cannot be required to repay the cash or other  resources received, the entity shall recognise the corresponding increase in equity to the extent of consideration received.

I'm tempted to read that 22.3 is about the classification and 22.7 the timing of recongniton (but 22.7 being irrelevant if the ASA is classed as a liability). It is a bit confusing though..

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By paul.benny
17th May 2022 14:42

As I read it, 22.3 concerns the issue of shares to settle a liability - eg a converting debt to equity.

The circumstances describe seem to exactly fit para 22.7 - the funds received are equity.

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