Last Friday, the FASB issued ASU 2011-11,¹ which provides new disclosure requirements for financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-10-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement (or similar agreement). Also, the IASB amended IFRS 7² to require the same disclosures.

According to the boards’ joint press release, the new guidance is “intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company’s financial position.” The new disclosures also provide information about how entities mitigate credit risk, including their collateral positions. The disclosures are effective for annual reporting periods beginning after January 1, 2013, including interim periods therein, with retrospective application required.

In addition, the IASB amended IAS 32³ to clarify:

• The meaning of the term “currently has a legally enforceable right of set-off.”
• “That some gross settlement systems may be considered equivalent to net settlement.”

Those amendments will be effective for annual reporting periods beginning after January 1, 2014, and also will require retrospective application.

Watch for Deloitte’s upcoming Heads Up newsletter on the new guidance.

[1] FASB Accounting Standards Update No. 2011-11, Disclosures About Offsetting Assets and Liabilities.

[2] IFRS 7, Financial Instruments: Disclosures.

[3] IAS 32, Financial Instruments: Presentation.