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ISDA compares derivative reporting under US GAAP and IFRS

24 May 2012

The International Swaps and Derivatives Association (ISDA) has published a paper 'Netting and Offsetting: Reporting Derivatives Under US GAAP and Under IFRS'. The paper describes the key differences between the approaches used by the IASB and FASB in balance sheet offsetting, and explains how each Board arrived at its current position. The paper examines why US GAAP allows for derivatives to be reported as net rather than gross on the balance sheet and why the ISDA favours this method.

The ISDA's paper provides insight into the different offsetting requirements under IFRS and US GAAP and their impact on liquidity, collateral and the new Basel III Leverage Ratio.

The paper also covers:

  • Why is netting/offsetting an issue?
  • Differences between securities, loans and receivables and derivatives
  • Portfolio management
  • The interest rate swap and credit default swap markets
  • The efficacy of netting and collateral as risk mitigation techniques
  • The offsetting rules under US GAAP and IFRS
  • Criteria for derivatives and repo markets
  • New offsetting disclosures
  • The new Basel III Leverage Ratio

This paper, Netting and Offsetting: Reporting Derivatives Under US GAAP and Under IFRS, is available on the ISDA website.