IFRS Accounting for client money
If an entity holds money on behalf of clients (‘client money’):
- should the client money be recognised as an asset in the entity’s financial statements?
- where the client money is recognised as an asset, can it be offset against the corresponding liability to the client on the face of the statement of financial position?
DEFINITION: Client money
“Client money” is used to describe a variety of arrangements in which the reporting entity holds funds on behalf of clients. Client money arrangements are often regulated and more specific definitions of the term are contained in some regulatory pronouncements. The guidance in this alert is not specific to any particular regulatory regime.
Entities may hold money on behalf of clients under many different contractual arrangements, for example:
- a bank may hold money on deposit in a customer’s bank account;
- a fund manager or stockbroker may hold money on behalf of a customer as a trustee;
- an insurance broker may hold premiums paid by policyholders before passing them onto an insurer;
- a lawyer or accountant may hold money on behalf of a client, often in a separate client bank account where the interest earned is for the client’s benefit.