Today, the FASB continued discussions of its joint project on the offsetting of financial assets and financial liabilities. The Board:

1. Tentatively decided to retain the current offsetting criteria in ASC 210¹ and ASC 815 (subject to the new disclosure requirements discussed with the IASB), clarifying its tentative decision from the June 14, 2011, joint session with the IASB.
2. Reached tentative decisions on the effective date and transition method for the proposed disclosure requirements.
3. Authorized the staff to begin preparing a ballot draft on offsetting.

Retention of Existing Offsetting Criteria

At their June 14, 2011, joint meeting, the FASB and IASB (the “boards”) reached different decisions on what accounting model should be used for offsetting financial assets and liabilities in the statement of financial position.² The boards decided that the best approach going forward was to focus their efforts on converging disclosure requirements to address differences between the boards’ approaches.³

Recognizing the boards’ inability to agree on a converged accounting model, the IASB later voted at a separate meeting to retain the existing offsetting requirements in IAS 32⁴ instead of further pursuing the offsetting model proposed in the joint exposure draft (ED). Similarly, at today’s meeting the FASB voted 7–0 to retain the existing derivative and nonderivative offsetting guidance (ASC 210 and ASC 815) (subject to the new disclosure requirements discussed with the IASB).

Disclosures Requirements — Effective Date and Transition

At their July 22, 2011, joint meeting, the boards tentatively agreed upon new, converged disclosure requirements for offsetting.⁵ At the July 28, 2011, IASB meeting, the IASB staff recommended (1) retrospective application for the disclosure requirements and (2) an effective date for annual and interim reporting periods beginning on or after January 1, 2013, but the IASB did not vote on this issue because it lacked a quorum. At today’s FASB meeting, the Board discussed when and how entities should apply the disclosure proposals and voted 7–0 to require retrospective application for the new guidance. The Board also unanimously agreed that the new disclosures should be effective for all entities for annual and interim periods beginning on or after January 1, 2013.

Ballot Draft

In a third vote, the FASB agreed 7–0 to authorize the staff to begin preparing a ballot draft for the offsetting disclosures, with the understanding that additional changes could be required to achieve convergence if the IASB later proposed changes to the disclosure requirements to address inconsistencies in the application of IAS 32 that were noted during the staff’s outreach efforts for the ED. During these discussions certain (but not a majority of) FASB members indicated that although they agreed with the proposed revisions to the disclosure requirements, they were still concerned that the offsetting project had not gone far enough in achieving the goal of developing a converged accounting model. These Board members noted that they were considering dissenting from the final standard.

[1] For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”

[2] Refer to Deloitte’s June 14, 2011, journal entry for further detail.

[3] Refer to Deloitte’s July 25, 2011, journal entry for further detail.

[4] IAS 32, Financial Instruments: Presentation.

[5] See footnote 3.