The international and US standard setter have
agreed on an approach to offsetting financial assets and financial
liabilities on the balance sheet.
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.
International Accounting Standards Board (IASB) chairman David
Tweedie said that currently companies can, in some instances,
report IFRS balance sheet figures that are double the size of their
US GAAP numbers and this is not acceptable in global capital
markets.
“Investors, and the FSB, G20 and others, have all called upon the
IASB and the FASB to resolve this problem. The proposals would
eliminate the differences in offsetting requirements,” Tweedie
said.
The IASB and Financial Accounting Standards
Board (FASB) are proposing that offsetting should apply only when
the right of set-off is enforceable at all times, including in
default and bankruptcy, and the ability to exercise this right is
unconditional, when it does not depend on a future event.
The joint proposals would amend IFRSs and US
GAAP and eliminate several industry-specific netting practices.
The proposal on offsetting is open for comment
until 28 April 2011.
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