Offsetting disclosures

Learning objectives

• Explain the scope of the offsetting disclosures: instruments offset under IAS 32 and instruments subject to an enforceable master netting arrangement, whether or not offset.L2
• Calculate the net amount presented, and then the net amount after related financial instruments and cash collateral, limited to the net amount of each instrument.L3

Normative references

• IFRS 7 §13AThe offsetting disclosures apply to all recognised financial instruments that are offset in accordance with IAS 32, and to those that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset.
• IFRS 7 §13BThe objective is to disclose information that enables users to evaluate the effect or potential effect of netting arrangements on the financial position, including the effect of rights of set-off associated with recognised financial assets and financial liabilities.
• IFRS 7 §13CAt the end of the reporting period, the entity discloses, separately for recognised financial assets and financial liabilities within para. 13A and in a tabular format unless another format is more appropriate: the gross amounts, the amounts offset under IAS 32, the net amounts presented, the amounts subject to an enforceable master netting arrangement or similar agreement that are not offset (recognised instruments that do not meet the IAS 32 criteria, and financial collateral, including cash collateral), and the net amount; the total amount deducted for an instrument is limited to its net amount presented (13D).

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

4 questions

• Which instruments fall within the scope of the IFRS 7 offsetting disclosures? Several answers are possible.L2
• Orion SA prepares the offsetting table for its derivative assets. Counterparty A: gross amount {gross_a}, of which {set_off_a} is offset in accordance with IAS 32; related financial instruments not offset {related_fi_a}; cash collateral received {cash_collateral_a}. Counterparty B: net amount presented {net_presented_b}; related financial instruments {related_fi_b}; cash collateral received {cash_collateral_b}. Table rule (case data): the amount deducted for an instrument does not exceed its net amount. Calculate the net amount presented for A, then the final net amount of A and that of B.L3
• Banque Orion holds derivatives with a counterparty under an enforceable master netting arrangement. It does not intend to settle net, so the IAS 32 offsetting criteria are not met and the amounts are not offset in the statement of financial position (case facts). Do these derivatives appear in the IFRS 7 offsetting disclosures?L3
• What is the objective of the IFRS 7 disclosures on the offsetting of financial assets and financial liabilities?L2