FASB Issues Accounting Standards Update Clarifying Scope of Disclosures That
Apply to Balance Sheet Offsetting of Assets and Liabilities
Norwalk,
CT, January 31, 2013—The Financial Accounting Standards Board (FASB)
today issued an Accounting Standards Update, Balance Sheet (Topic 210):
Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities. The Update
clarifies the scope of transactions that are subject to the disclosures about
offsetting.
"This Update addresses stakeholder questions about the scope
of balance sheet offsetting guidance issued by the FASB at the end of 2011,"
said FASB Technical Director Susan M. Cosper. "The Update will reduce unintended
costs while providing investors and other users with the information they need
to understand the extent to which certain financial instruments are offset
pursuant to master netting arrangements."
The Update clarifies that
ordinary trade receivables and receivables are not in the scope of Accounting
Standards Update No. 2011-11, Balance Sheet (Topic 210): Disclosures about
Offsetting Assets and Liabilities. Specifically, Update 2011-11 applies only to
derivatives, repurchase agreements and reverse purchase agreements, and
securities borrowing and securities lending transactions that are either offset
in accordance with specific criteria contained in FASB Accounting Standards
Codification® or subject to a master netting arrangement or similar
agreement.
Issued in December 2011, Update 2011-11 was the result of a
joint project with the International Accounting Standards Board. Its objective
was to improve transparency and comparability between U.S. GAAP and
International Financial Reporting Standards by requiring enhanced disclosures
about financial instruments and derivative instruments that are either (1)
offset on the statement of financial position or (2) subject to an enforceable
master netting arrangement or similar agreement.
The Board undertook
this clarification project in response to concerns expressed by U.S.
stakeholders about the standard´s broad definition of financial instruments.
After the standard was finalized, companies realized that many contracts have
standard commercial provisions that would equate to a master netting
arrangement, significantly increasing the cost of compliance at minimal value to
financial statement users.
The Update
is available on the FASB website. More information is available about this and
other FASB projects at www.fasb.org.
About
the Financial Accounting Standards Board
Since 1973, the
Financial Accounting Standards Board has been the designated organization in the
private sector for establishing standards of financial accounting and reporting.
Those standards govern the preparation of financial reports and are officially
recognized as authoritative by the Securities and Exchange Commission and the
American Institute of Certified Public Accountants. Such standards are essential
to the efficient functioning of the economy because investors, creditors,
auditors, and others rely on credible, transparent, and comparable financial
information. For more information about the FASB, visit our website at www.fasb.org.