Starting with 2013 financial statements, companies need to make additional disclosures about assets and liabilities that are offset on their balance sheets. These disclosures are expected to be helpful to users of financial statements, and they will be slightly less onerous than originally expected, thanks to a clarification issued by the FASB earlier this year as Accounting Standards Update 2013-01. This Messenger provides a timely reminder about the additional disclosure requirements and highlights the effects of the clarification.

1. April 2013
MHMMessenger
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M AY E R H O F F M A N M C C A N N P. C . – A N I N D E P E N D E N T C PA F I R M
A publication of the Professional Standards Group
Disclosure Requirements about Offsetting Take Effect in 2013
Starting with 2013 financial statements, companies and those that meet the requirements provided in
need to make additional disclosures about assets Accounting Standards Codification Section 210-20-
and liabilities that are offset on their balance sheets. 45, Balance Sheet Offsetting, or Section 815-10-45,
These disclosures are expected to be helpful to Derivatives and Hedging, Balance Sheet Netting. The
users of financial statements, and they will be slightly general guideline under Topic 210 is that offsetting is
less onerous than originally expected, thanks to a permitted in situations where each of two parties owes
clarification issued by the FASB earlier this year the other a determinable amount and the reporting
as Accounting Standards Update 2013-01. This party has the right and intent to set off the amount it
Messenger provides a timely reminder about the owes with the amount owed by the other party. The
additional disclosure requirements and highlights the right of setoff must also be enforceable by law.
effects of the clarification.
As discussed in MHM Messenger 5-12 dated February
The disclosure requirements 28, 2012, the disclosure requirements are effective for
fiscal years beginning on or after January 1, 2013,
The purpose of the disclosures is to help financial and interim periods within those annual periods, and
statement users who said they need information about they include a tabular presentation of the following
the gross amounts of certain assets and liabilities so information:
they can reconcile statements prepared under US
generally accepted accounting principles (US GAAP) (a) The gross amounts of the recognized assets and
with those prepared under international financial liabilities.
reporting standards (IFRS).
(b) The amounts offset to determine the net amounts
The disclosure requirements were introduced in presented in the statement of financial position.
Accounting Standards Update 2011-11 Disclosures
about Offsetting Assets and Liabilities. They apply (c) The net amounts presented in the statement of
to financial instruments that are eligible for offsetting financial position.
under US GAAP, including those that are subject to
a master netting arrangement or similar arrangement (d) The amounts subject to an enforceable master
netting arrangement or similar agreement not
otherwise included in (b).
(e) The net amount after deducting the amounts in (d)
from the amounts in (c).
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2. MHMMessenger
Effects of the clarification This limitation on the scope is seen as a cost-
effective way to meet the needs of users because
The clarification is rooted in concerns that were raised trade payables and receivables that an entity has the
following the release of ASU 2011-11 about contracts intent to settle on a net basis in the ordinary course of
that contain standard commercial provisions that business would be presented similarly on a net basis
could be considered the equivalent of a master netting in both financial statements prepared in accordance
arrangement and the risk of diversity in practice that with US GAAP and financial statements prepared in
might result if these contracts were accounted for accordance with IFRS.
differently by different companies. At issue were
standard provisions that state all receivables and The clarification and the disclosure requirements have
payables with a particular counterparty can be netted the same effective date.
in an event of default.
For more information
In response to these concerns, Update 2013-01,
Clarifying the Scope of Disclosures about Offsetting If you have any specific questions about the new
Assets and Liabilities, limits the scope of Update 2011- disclosure requirements, please contact Mike Loritz of
11 to: MHM’s Professional Standards Group or your MHM
service professional. You can reach Mike directly at
• Recognized derivative instruments accounted for mloritz@cbiz.com or 913-234-1226.
in accordance with Topic 815, including bifurcated
embedded derivatives, repurchase agreements
and reverse repurchase agreements, and securities
borrowing and securities lending transactions that
are offset in accordance with either Section 210-
20-45 or Section 815-10-45.
• Recognized derivative instruments accounted for
in accordance with Topic 815, including bifurcated
embedded derivatives, repurchase agreements
and reverse repurchase agreements, and securities
borrowing and securities lending transactions
that are subject to an enforceable master netting
arrangement or similar agreement, irrespective of
whether they are offset in accordance with either
Section 210-20-45 or Section 815-10-45.
The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM service provider to further discuss the impact on your financial statements.
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