The International Accounting Standards Board
(IASB) and the Financial Accounting Standards Board (FASB) have
issued common disclosure requirements to help investors better
assess the effect of offsetting arrangements on a company’s
financial position.

Offsetting is the presentation of assets and
liabilities as a single net amount in the balance sheet and the
eligibility criteria for offsetting is different in IFRSs and US

Unlike IFRSs, US GAAP allows companies the
option to present net in their balance sheets; derivatives are
subject to a legally enforceable netting arrangement with the same
party where rights of set-off are only available in the event of
default or bankruptcy. 

The boards have retained existing offsetting
models but have issued new disclosure requirements to allow
investors to better compare financial statements prepared in
accordance with IFRSs or US GAAP. 
The IASB and FASB said common disclosure requirements also improve
transparency in the reporting of how companies mitigate credit
risk, including disclosure of related collateral pledged or

IASB chairman Hans Hoogervorst said these
disclosures will help investors to bridge differences in the
offsetting reporting requirements of IFRSs and US GAAP but he
stressed that “using disclosures to bridge differences in
offsetting requirements was plan ‘B’ for both boards.”

Companies and other entities are required to
apply the amendments for annual reporting periods beginning on or
after 1 January 2013 and interim periods within those annual
periods. The required disclosures should be provided

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