FASB clarifies scope of offsetting disclosure requirements

BY KEN TYSIAC

An Accounting Standards Update (ASU) issued Thursday by FASB makes it clear that a 2011 standard on offsetting disclosures does not apply to ordinary trade receivables and receivables.

ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities, excludes trade receivables and receivables from the scope of the standard.

The new ASU explains that the 2011 standard, ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures About Offsetting Assets and Liabilities, applies to the following when they are offset in accordance with FASB criteria or subject to a master netting arrangement or similar agreement:

  • Derivatives.
  • Repurchase agreements and reverse purchase agreements.
  • Securities borrowing and securities lending transactions.


Issued in December 2011, ASU No. 2011-11 was the result of a joint project with the International Accounting Standards Board (IASB). It was designed to improve transparency and comparability between U.S. GAAP and IFRS. The standard requires enhanced disclosures about financial instruments that are offset in the statement of financial position, or subject to an enforceable master netting arrangement or similar agreement.

After the standard was released, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement. FASB concluded that requiring enhanced disclosures for ordinary trade receivables and receivables would significantly increase the cost of compliance with limited value to users of financial statements.

Comment letters were largely supportive of the clarification. Letters from the automotive industry in particular expressed approval, as Ford, General Motors, and a group representing six SEC-registered automotive retailers endorsed the change in scope.

“The original scope included certain trade accounts receivables and payables resulting in proposed disclosures that would not provide useful information, would not be consistent with the objectives of Update 2011-11, and would require costly system changes and workarounds to implement,” General Motors Chief Accounting Officer Nick Cyprus wrote.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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