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Financial instruments — Asset and liability offsetting

Background

Offsetting, otherwise known as netting, takes place when entities present their rights and obligations to each other as a net amount in their statement of financial position.

In response to stakeholders' concerns (including those of the Basel Committee on Banking Supervision and the Financial Stability Board), the IASB and the FASB decided to jointly address differences in their respective standards on balance sheet netting of derivative contracts and other financial instruments. US GAAP currently permits an exception to the offsetting criteria for certain derivative contracts subject to a master netting agreement (a conditional form of netting where in the event of default or bankruptcy all asset and liability contracts are netted into a single payable or receivable amount) and repurchase agreements while IFRS does not permit a similar exception.

 

Current status of the project

This project has been completed.

In January 2011, the IASB and FASB issued an exposure draft ED/2011/1 Offsetting Financial Assets and Financial Liabilities. During redeliberations, the IASB and FASB were unable to agree on the overall approach for offsetting of financial assets and financial liabilities, and the Boards decided to focus on disclosure requirements that would allow users to more easily compare credit exposure among US GAAP and IFRS preparers.  The IASB additionally decided to expand the application guidance on offsetting in IAS 32 Financial Instruments: Presentation.

The IASB released Disclosures — Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) and Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) on 16 December 2011.

 

Project milestones

DateDevelopmentComments
June 2010 Added to the IASB's agenda
28 July 2010 User survey published Completion deadline 20 August 2010
28 January 2011 Exposure Draft ED/2011/01 Offsetting Financial Assets and Financial Liabilities published Comment deadline 28 April 2011
16 December 2011 Disclosures — Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) issued The amendments to IFRS 7 apply to annual periods beginning on or after 1 January 2013 and interim periods within those periods
16 December 2011 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) issued The amendments to the application guidance in IAS 32 are applicable to annual periods beginning on or after 1 January 2014

Correction list for hyphenation

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