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 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 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.

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’.