Exposure draft and comment letters
On 28 January 2011 the International Accounting Standards Board (IASB) published for public comment an exposure draft on offsetting financial assets and financial liabilities. The US-based Financial Accounting Standards Board (FASB) will be publishing an identical exposure draft.
Under current accounting requirements, the circumstances when financial assets and financial liabilities may be presented on an entity’s balance sheet as a single net amount, or as two gross amounts, differs depending on whether the entity reports using International Financial Reporting Standards (IFRSs) or US generally accepted accounting principles (GAAP). The accounting differences result in the single largest quantitative difference in reported numbers in balance sheets prepared in accordance with IFRSs and US GAAP. This reduces the comparability of these balance sheets, and is especially prominent in the presentation of derivative assets and derivative liabilities by financial institutions. As a result, users of financial statements have requested that the boards find a common solution for offsetting these items. Proposing a common solution is also consistent with requests from the G20 and the Financial Stability Board.
The boards are proposing that offsetting apply only when the right of set-off is enforceable at all times, including default and bankruptcy, the ability to exercise this right is unconditional (it does not depend on a future event). The companies must intend to net settle, or simultaneously settle, the gross amounts. Provided all of these requirements are met, offsetting would be required.
Comment letter deadline
The comment period for the exposure draft: Offsetting Financial Assets and Financial Liabilities will close on 28 April 2011.
Comment letters should be submitted by email to email@example.com, File Reference No. 2011-100. Those without email should send their comments to:
File Reference No. 2011-100
401 Merritt 7
PO Box 5116
The IASB will review all comment letters submitted to the FASB. It is not necessary to submit a letter to both organisations.
Click here to access the comment letters on the FASB website.