In brief: FASB finalizes amendment to clarify the scope of balance sheet offsetting disclosures (No. 2013-04)
In brief
What's new?
On January 31, 2013, the FASB issued Accounting Standards Update No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities (the "ASU"). The ASU limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement.
Background
In December 2011, the FASB issued Accounting Standards Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. Constituents in a variety of industries raised concerns regarding the potentially broad scope of these disclosure requirements. In response to these concerns, the FASB decided to amend and clarify the scope of the balance sheet offsetting disclosures.
What are the key provisions?
The ASU limits the scope of the new balance sheet offsetting disclosures to the following financial instruments, to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement:
- Recognized derivative instruments accounted for under ASC 815, Derivatives and Hedging, including bifurcated embedded derivatives
- Repurchase agreements and reverse repurchase agreements
- Securities borrowing and securities lending transactions
The disclosures are required irrespective of whether the transactions are offset in the statement of financial position.
The effective date and transition of the disclosure requirements in ASU 2011-11 remain unchanged. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Entities will provide the new disclosures retrospectively for all comparative periods.
Is convergence achieved?
The ASU could create differences between the disclosures reported under U.S. GAAP and IFRS. However, the disclosures will be the same for transactions that are likely to result in the most significant differences in the presentation under U.S. GAAP and IFRS, namely derivatives, repurchase agreements, and securities lending agreements.
Who's affected?
The scope clarification affects all entities with financial instruments subject to an enforceable master netting arrangement or similar agreement that may have been affected by the new offsetting disclosure requirements.
What's the effective date?
An entity is required to apply the ASU for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. This date coincides with the effective date of the disclosure requirements in ASU 2011-11.
Questions?
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Financial Instruments team in the National Professional Services Group (1-973-236-7803).
Authored by:
Chip Currie
Partner
Phone: 1-973-236-5331
Email: frederick.currie@us.pwc.com
John Althoff
Partner
Phone: 1-973-236-7021
Email: john.althoff@us.pwc.com
Kristin Derington-Ruiz
Senior Manager
Phone: 1-973-236-7093
Email: kristin.derington-ruiz@us.pwc.com
In Brief is designed to provide a timely, high-level overview of significant financial reporting developments. It is issued by the National Professional Services Group of PwC. This publication is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. To access additional content on financial reporting issues, register for CFOdirect Network (www.cfodirect.pwc.com), PwC’s online resource for financial executives.