The two offsetting criteria

Learning objectives

• Explain that offsetting requires a currently legally enforceable right and the intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.L1
• Determine whether a financial asset and a financial liability are presented at their net amount.L3

Normative references

• IAS 32 §42A financial asset and a financial liability are offset and the net amount presented if, and only if, the entity currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously; a transferred asset that does not qualify for derecognition is not offset against the associated liability (IFRS 9, para. 3.2.22).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• A financial asset and a financial liability with the same counterparty are presented at their net amount as soon as the entity has a legally enforceable right to set them off, even without an intention to settle on a net basis.L1
• Pivoine SA has, with Cobalt SA, a receivable of 300,000 and a payable of 280,000. A contract gives it the currently legally enforceable right to set off these amounts. Pivoine nevertheless settles its receivables and payables with Cobalt separately, on different dates, and has no intention either of settling on a net basis or of realising the asset and settling the liability simultaneously (case facts). How does Pivoine present these two amounts?L3
• Mistral SA has two counterparties. With A: a receivable of {receivable_a} and a payable of {payable_a}, with a currently legally enforceable right of set-off and the intention to settle on a net basis. With B: a receivable of {receivable_b} and a payable of {payable_b}, but the right of set-off is contingent on a future event (case facts). Calculate the net amount presented for A, then the total of the financial assets presented for A and B.L3