On The Horizon - December 4, 2012

Author:Ms Grant Thornton's Audit Practice Group
Profession:Grant Thornton LLP

FASB proposes to narrow scope of disclosures about offsetting

The FASB recently issued proposed Standards Update (ASU), Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, to respond to stakeholders' concerns raised while implementing the guidance in ASU 2011-11, Disclosures about Offsetting Assets and Liabilities.

As originally issued, the disclosure requirements in ASU 2011-11 applied to, among other things, recognized financial instruments and derivatives that are subject to an enforceable master netting arrangement or similar agreement. However, stakeholders recently informed the Board that many commercial agreements permit offsetting receivables and payables in an event of default, and that these provisions are similar to a master netting arrangement.

Since it was not the Board's intent to require the disclosures for offsetting assets and liabilities to contracts subject to netting under standard commercial provisions, such as trade receivables and payables, the Board is

proposing to clarify that the scope of the guidance in ASU 2011-11 is limited to recognized derivatives, repurchase and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either

Offset under FASB Accounting Standards Codification® (ASC) 210-20-45, Balance Sheet: Offsetting, or ASC 815-10-45, Derivatives and Hedging. Subject to an enforceable master netting arrangement or similar agreement. The clarified scope would be effective for annual reporting periods, and for interim periods within those annual periods, beginning on or after January 1, 2013. Entities would be required to apply the related disclosure requirements retrospectively for all comparative periods presented.

Comments on the proposed ASU are due by December 21, 2012.

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