NEWS RELEASE 11/26/12
FASB Issues Proposal to Clarify Scope of Disclosures That Apply to
Norwalk, CT, November 26, 2012—The Financial Accounting Standards Board (FASB) today issued for public comment a proposed Accounting Standards Update—Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities—that would clarify the scope of transactions that are subject to the disclosures about offsetting. Stakeholders are asked to review and provide comment on the proposal by December 21, 2012.
Balance Sheet Offsetting of Assets and Liabilities
"This proposed Update addresses questions surrounding the scope of balance sheet offsetting guidance issued last year by the FASB,” said FASB Technical Director Susan M. Cosper. “The goal is to 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 Board’s proposed Update would clarify the scope of Accounting Standards Update No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, Update 2011-11 would apply 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 last December, 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.
Stakeholders are encouraged to review and provide comment on the proposed Update by December 21, 2012. More information is available about this and other FASB projects at http://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.