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IAS 32 — Offsetting and cash pooling arrangements

Date recorded:

IAS 32 Financial Instruments: Presentation — Offsetting and cash pooling - Comment Letter Analysis and Finalisation of Agenda Decision - Agenda paper 10

Recap

In November 2015, the IFRS Interpretations Committee discussed whether particular cash pooling arrangements would meet the requirements for offsetting in IAS 32. The Interpretations Committee tentatively decided that the issue should not be taken into its agenda because (i) many different types of cash pooling arrangements exist in practice and that, consequently, the determination of what constitutes an intention to settle on a net basis would depend on the individual facts and circumstances of each case; and (ii) the results of the outreach did not suggest that the particular type of cash pooling arrangement described by the submitter was widespread.

The purpose of this session was to provide an analysis of the comments letters received and discuss the staff recommendation to finalise the agenda decision.

Comment letters analysis

The staff indicated that the majority of respondents agreed with not taking the issue onto the Interpretations Committee’s agenda. However, some respondents expressed concerns about the proposed wording because it could have unintended consequences; particularly of the perceived implication of a need for certainty over the amounts to be offset.

Staff recommendation

The staff proposed to finalise the agenda decision.  The staff also proposed to amend the proposed wording to address those concerns and to make an explicit reference to expected cash movements which were reflected in the case submitted.

Discussion

The Interpretations Committee approved the staff recommendation subject to wording changes.

The staff was asked to clarify in the agenda decision the type of judgements that would be necessary to achieve a conclusion whether offsetting would be appropriate.

There was some discussion that cash flow movements sometimes would not reflect intention because it could just be increases of the amount that would be net settled. It was also pointed out that it would be possible under IAS 32 that an entity could offset individual cash flows as opposed to entire balances; that situation would also be clarified in the agenda decision. The agenda decision would also reflect the need for disclosures when significant judgements were applied as required in IAS 1.

Correction list for hyphenation

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