Wiley GAAP: Financial Statement Disclosure Manual. Joanne M. Flood
settlements for securities transferred are made under established bank arrangements that provide that an entity to have cash on deposit for net amounts due at close of business. The entity uses the same account for cash inflows and outflows related to the settlement. (Also see ASC 210‐20‐45‐14 through 17 for additional details.)
These conditions do not apply to amounts recognized for other types of repurchase and reverse repurchase agreements executed under a master netting arrangement. This does not mean that those amounts could not otherwise meet the conditions for a right of setoff. (ASC 210‐20‐45‐13)
Disclosures The disclosures required by ASC 210‐20 apply to:
Recognized derivative instruments accounted for in accordance with ASC 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 ASC 210‐20‐45 or ASC 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 ASC 210‐20‐45 or ASC 815‐10‐45.(ASC 210‐20‐50‐1)
The FASB has made it clear in its Background Comments for ASU 2013‐01 that the disclosure requirements do not apply to:
Loan and customer deposits at the same financial institution.
Financial instruments only subject to collateral agreement. The FASB views these as primarily credit enhancements.
Trade receivables and payables with a counterparty to be netted in the event of default. The FASB views these as primarily credit enhancements. In addition, requiring these to be disclosed would cause an undue burden on financial statement preparers.
Receivables and payables of brokers dealers resulting from unsettled regular‐way trades.
Offsetting relates to presentation only. If an asset and liability are presented net, it does not mean that the entity no longer has a contractual right or obligation. Therefore, to adequately inform the users, the Codification requires entities to disaggregate the relevant information. The disclosures must include:
1 The gross amounts for those recognized assets and liabilities,
2 The amounts offset to determine the net amounts presented in the balance sheet,
3 The net amounts presented in the balance sheet,
4 Amounts subject to an enforceable netting arrangement not included in the statement of financial position, instruments that the entity makes an election not to offset, and the amounts related to financial collateral.
5 The net amount after deducting “d” from “c” above.(ASC 210‐20‐50‐3)
Unless another format is more appropriate, the disclosures above must be presented in tabular format, separately by assets and liabilities. (ASC 210‐20‐50‐4)
In addition to the quantitative information, the entity must present a description of the rights of setoff for recognized assets and liabilities subject to an enforceable master netting or similar arrangement. (ASC 210‐20‐50‐5)
PRESENTATION AND DISCLOSURE EXAMPLES
Example 3.1: Statement of Financial Position—Highly Aggregated
ABC Corporation Statement of Financial Position December 31, 20X1
| Assets | |
| Current assets | xxx |
| Long‐term investments | xxx |
| Property, plant, and equipment, net | xxx |
| Deferred income tax assets | xxx |
| Goodwill | xxx |
| Intangible and other assets | xxx |
| Total assets | xxx |
| Liabilities and Shareholders' Equity | |
| Current liabilities | xxx |
| Deferred income tax liabilities | xxx |
| Long‐term debt | xxx |
| Total liabilities | xxx |
| Capital stock | xxx |
| Additional paid‐in capital | xxx |
| Retained earnings | xxx |
| Accumulated other comprehensive income | xxx |
| Total shareholders' equity | xxx |
| Total liabilities and shareholders' equity | xxx |
The following more comprehensive statement of financial position includes more line items (for details about specific assets and liabilities) than are found in most statements of financial position.
Example 3.2: Statement of Financial Position—Highly Detailed
ABC Corporation Statement of Financial Position December 31, 20X1
| Assets | |||
| Current assets: | |||
| Cash and bank deposits: | |||
| Restricted to current bond maturity | $xxx | ||
| Unrestricted | xxx | $xxx | |
| Short‐term investments: | |||
|
Marketable equity securities |