FASB proposes scope clarification of offsetting disclosures

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29 Nov 2012

On 26 November 2012, the US Financial Accounting Standards Board (FASB) issued Proposed Accounting Standards Update, 'Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities'. The proposed ASU would clarify which instruments and transactions are subject to the disclosure requirements under ASU 2011-11 'Disclosures About Offsetting Assets and Liabilities' for financial assets and liabilities that are offset in the statement of financial position or subject to master netting arrangements or similar agreements.

The proposed ASU is intended to address preparer concerns that the scope of the disclosure requirements under ASU 2011-11 is overly broad and that the related compliance costs would exceed any benefits ultimately realized by financial statement users. Like the requirements under ASU 2011-11, the proposed requirements would be effective for fiscal years beginning on or after 1 January 2013, and interim periods therein. Retrospective application would be required for any period presented that begins before the entity’s initial application of the new requirements. Comments on the proposal are due by 21 December 2012.

Impact on convergence with IFRSs

Concurrently with the FASB’s issuance of ASU 2011-11, the IASB issued amendments to IFRS 7 with a comparable effective date and essentially the same disclosure requirements as those under ASU 2011-11. Accordingly, if the FASB’s proposal is finalised, fewer financial instruments would be subject to the offsetting disclosure requirements under US GAAP than under IFRSs.

At their November 2012 meeting, the IASB staff updated the IASB on the FASB’s decisions regarding the scope of the offsetting disclosures and indicated that it did not recommend that the IASB consider changing the scope of the disclosures under IFRSs. The session was informational, and the IASB was not asked to make any decisions. It is uncertain whether the IASB will revisit this issue in the future.

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