The International Accounting Standards Board (IASB) today clarified its requirements for offsetting financial instruments by issuing Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32). The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32 Financial Instruments: Presentation.

The amendments clarify:

  • the meaning of ‘currently has a legally enforceable right of set-off’; and
  •  that some gross settlement systems may be considered equivalent to net settlement.

The amendments are effective for annual periods beginning on or after 1 January 2014 and are required to be applied retrospectively.

The amendments are part of the IASB’s offsetting project. As part of that project, today the IASB also separately issued Disclosures—Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7).

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