AASB Standard
AASB 2012-2
June 2012
Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities
[AASB 7 & AASB 132]
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ISSN 1036-4803
CONTENTS
Preface
Accounting Standard
AASB 2012-2 AmenDMENTS TO aUSTRALIAN aCCOUNTING sTANDARDS – Disclosures – Offsetting Financial Assets and Financial Liabilities
Paragraphs
Objective 1
Application 2 – 4
Amendments to AASB 7 5 – 7
Amendment to AASB 132 8
IASB IMPLEMENTATION GUIDANCE – AMENDMENTS
(available on the AASB website)
IASB BASIS FOR CONCLUSIONS – AMENDMENTS
(available on the AASB website)
Australian Accounting Standard AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities is set out in paragraphs 1 – 8. All the paragraphs have equal authority.
Preface
Introduction
This Standard makes amendments to Australian Accounting Standards AASB 7 Financial Instruments: Disclosures and AASB 132 Financial Instruments: Presentation.
These amendments arise from the issuance of Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) by the International Accounting Standards Board in December 2011.
Main Features of this Standard
Application Date
This Standard applies to annual reporting periods beginning on or after 1 January 2013 and interim periods within those annual reporting periods.
Main Requirements
This Standard amends the required disclosures in AASB 7 to include information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position.
This Standard also amends AASB 132 to refer to the additional disclosures added to AASB 7 by this Standard.
A subsequent Standard will establish reduced disclosure requirements for entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements in relation to the disclosures added to AASB 7 by this Standard.
aCCOUNTING STANDARD AASB 2012-2
The Australian Accounting Standards Board makes Accounting Standard AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities under section 334 of the Corporations Act 2001.
Kevin M. Stevenson
Dated 29 June 2012
Chair – AASB
aCCOUNTING STANDARD AASB 2012-2
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – Disclosures – Offsetting Financial Assets and Financial Liabilities
Objective
1 The objective of this Standard is to make amendments to:
(a) AASB 7 Financial Instruments: Disclosures; and
(b) AASB 132 Financial Instruments: Presentation;
as a consequence of the issuance of International Financial Reporting Standard Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) by the International Accounting Standards Board in December 2011.
Application
2 This Standard applies to:
(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;
(b) general purpose financial statements of each other reporting entity; and
(c) financial statements that are, or are held out to be, general purpose financial statements.
3 This Standard applies to annual reporting periods beginning on or after 1 January 2013 and interim periods within those annual reporting periods.
4 This Standard uses underlining, striking out and other typographical material to identify some of the amendments to a Standard, in order to make the amendments more understandable. However, the amendments made by this Standard do not include that underlining, striking out or other typographical material.
Amendments to AASB 7
5 A heading and paragraphs 13A-13F are added after paragraph 13 as follows:
Offsetting financial assets and financial liabilities
13A The disclosures in paragraphs 13B-13E supplement the other disclosure requirements of this Standard and are required for all recognised financial instruments that are set off in accordance with paragraph 42 of AASB 132. These disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with paragraph 42 of AASB 132.
13B An entity shall disclose information to enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on the entity’s financial position. This includes the effect or potential effect of rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities that are within the scope of paragraph 13A.
13C To meet the objective in paragraph 13B, an entity shall disclose, at the end of the reporting period, the following quantitative information separately for recognised financial assets and recognised financial liabilities that are within the scope of paragraph 13A:
(a) the gross amounts of those recognised financial assets and recognised financial liabilities;
(b) the amounts that are set off in accordance with the criteria in paragraph 42 of AASB 132 when determining the net amounts presented in the statement of financial position;
(c) the net amounts presented in the statement of financial position;
(d) the amounts subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in paragraph 13C(b), including:
(i) amounts related to recognised financial instruments that do not meet some or all of the offsetting criteria in paragraph 42 of AASB 132; and
(ii) amounts related to financial collateral (including cash collateral); and
(e) the net amount after deducting the amounts in (d) from the amounts in (c) above.
The information required by this paragraph shall be presented in a tabular format, separately for financial assets and financial liabilities, unless another format is more appropriate.
13D The total amount disclosed in accordance with paragraph 13C(d) for an instrument shall be limited to the amount in paragraph 13C(c) for that instrument.
13E An entity shall include a description in the disclosures of the rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities subject to enforceable master netting arrangements and similar agreements that are disclosed in accordance with paragraph 13C(d), including the nature of those rights.
13F If the information required by paragraphs 13B-13E is disclosed in more than one note to the financial statements, an entity shall cross-refer between those notes.
6 Paragraph 44R is added as follows:
44R AASB 2012-2 Amendments to Australian Accounting Standards − Disclosures − Offsetting Financial Assets and Financial Liabilities, issued in June 2012, added paragraphs 13A-13F and B40-B53. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2013 and interim periods within those annual reporting periods. An entity shall provide the disclosures required by those amendments retrospectively.
7 Paragraphs B40-B53 and related headings are added as follows:
Offsetting financial assets and financial liabilities (paragraphs 13A-13F)
Scope (paragraph 13A)
B40 The disclosures in paragraphs 13B-13E are required for all recognised financial instruments that are set off in accordance with paragraph 42 of AASB 132. In addition, financial instruments are within the scope of the disclosure requirements in paragraphs 13B-13E if they are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments and transactions, irrespective of whether the financial instruments are set off in accordance with paragraph 42 of AASB 132.
B41 The similar agreements referred to in paragraphs 13A and B40 include derivative clearing agreements, global master repurchase agreements, global master securities lending agreements, and any related rights to financial collateral. The similar financial instruments and transactions referred to in paragraph B40 include derivatives, sale and repurchase agreements, reverse sale and repurchase agreements, securities borrowing, and securities lending agreements. Examples of financial instruments that are not within the scope of paragraph 13A are loans and customer deposits at the same institution (unless they are set off in the statement of financial position), and financial instruments that are subject only to a collateral agreement.
Disclosure of quantitative information for recognised financial assets and recognised financial liabilities within the scope of paragraph 13A (paragraph 13C)
B42 Financial instruments disclosed in accordance with paragraph 13C may be subject to different measurement requirements (for example, a payable related to a repurchase agreement may be measured at amortised cost, while a derivative will be measured at fair value). An entity shall include instruments at their recognised amounts and describe any resulting measurement differences in the related disclosures.
Disclosure of the gross amounts of recognised financial assets and recognised financial liabilities within the scope of paragraph 13A (paragraph 13C(a))
B43 The amounts required by paragraph 13C(a) relate to recognised financial instruments that are set off in accordance with paragraph 42 of AASB 132. The amounts required by paragraph 13C(a) also relate to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement irrespective of whether they meet the offsetting criteria. However, the disclosures required by paragraph 13C(a) do not relate to any amounts recognised as a result of collateral agreements that do not meet the offsetting criteria in paragraph 42 of AASB 132. Instead, such amounts are required to be disclosed in accordance with paragraph 13C(d).
Disclosure of the amounts that are set off in accordance with the criteria in paragraph 42 of AASB 132 (paragraph 13C(b))
B44 Paragraph 13C(b) requires that entities disclose the amounts set off in accordance with paragraph 42 of AASB 132 when determining the net amounts presented in the statement of financial position. The amounts of both the recognised financial assets and the recognised financial liabilities that are subject to set-off under the same arrangement will be disclosed in both the financial asset and financial liability disclosures. However, the amounts disclosed (in, for example, a table) are limited to the amounts that are subject to set-off. For example, an entity may have a recognised derivative asset and a recognised derivative liability that meet the offsetting criteria in paragraph 42 of AASB 132. If the gross amount of the derivative asset is larger than the gross amount of the derivative liability, the financial asset disclosure table will include the entire amount of the derivative asset (in accordance with paragraph 13C(a)) and the entire amount of the derivative liability (in accordance with paragraph 13C(b)). However, while the financial liability disclosure table will include the entire amount of the derivative liability (in accordance with paragraph 13C(a)), it will only include the amount of the derivative asset (in accordance with paragraph 13C(b)) that is equal to the amount of the derivative liability.
Disclosure of the net amounts presented in the statement of financial position (paragraph 13C(c))
B45 If an entity has instruments that meet the scope of these disclosures (as specified in paragraph 13A), but that do not meet the offsetting criteria in paragraph 42 of AASB 132, the amounts required to be disclosed by paragraph 13C(c) would equal the amounts required to be disclosed by paragraph 13C(a).
B46 The amounts required to be disclosed by paragraph 13C(c) must be reconciled to the individual line item amounts presented in the statement of financial position. For example, if an entity determines that the aggregation or disaggregation of individual financial statement line item amounts provides more relevant information, it must reconcile the aggregated or disaggregated amounts disclosed in paragraph 13C(c) back to the individual line item amounts presented in the statement of financial position.
Disclosure of the amounts subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in paragraph 13C(b) (paragraph 13C(d))
B47 Paragraph 13C(d) requires that entities disclose amounts that are subject to an enforceable master netting arrangement or similar agreement that are not otherwise included in paragraph 13C(b). Paragraph 13C(d)(i) refers to amounts related to recognised financial instruments that do not meet some or all of the offsetting criteria in paragraph 42 of AASB 132 (for example, current rights of set-off that do not meet the criterion in paragraph 42(b) of AASB 132, or conditional rights of set-off that are enforceable and exercisable only in the event of default, or only in the event of insolvency or bankruptcy of any of the counterparties).
B48 Paragraph 13C(d)(ii) refers to amounts related to financial collateral, including cash collateral, both received and pledged. An entity shall disclose the fair value of those financial instruments that have been pledged or received as collateral. The amounts disclosed in accordance with paragraph 13C(d)(ii) should relate to the actual collateral received or pledged and not to any resulting payables or receivables recognised to return or receive back such collateral.
Limits on the amounts disclosed in paragraph 13C(d) (paragraph 13D)
B49 When disclosing amounts in accordance with paragraph 13C(d), an entity must take into account the effects of over-collateralisation by financial instrument. To do so, the entity must first deduct the amounts disclosed in accordance with paragraph 13C(d)(i) from the amount disclosed in accordance with paragraph 13C(c). The entity shall then limit the amounts disclosed in accordance with paragraph 13C(d)(ii) to the remaining amount in paragraph 13C(c) for the related financial instrument. However, if rights to collateral can be enforced across financial instruments, such rights can be included in the disclosure provided in accordance with paragraph 13D.
Description of the rights of set-off subject to enforceable master netting arrangements and similar agreements (paragraph 13E)
B50 An entity shall describe the types of rights of set-off and similar arrangements disclosed in accordance with paragraph 13C(d), including the nature of those rights. For example, an entity shall describe its conditional rights. For instruments subject to rights of set-off that are not contingent on a future event but that do not meet the remaining criteria in paragraph 42 of AASB 132, the entity shall describe the reason(s) why the criteria are not met. For any financial collateral received or pledged, the entity shall describe the terms of the collateral agreement (for example, when the collateral is restricted).
Disclosure by type of financial instrument or by counterparty
B51 The quantitative disclosures required by paragraph 13C(a)-(e) may be grouped by type of financial instrument or transaction (for example, derivatives, repurchase and reverse repurchase agreements or securities borrowing and securities lending agreements).
B52 Alternatively, an entity may group the quantitative disclosures required by paragraph 13C(a)-(c) by type of financial instrument, and the quantitative disclosures required by paragraph 13C(c)-(e) by counterparty. If an entity provides the required information by counterparty, the entity is not required to identify the counterparties by name. However, designation of counterparties (Counterparty A, Counterparty B, Counterparty C, etc) shall remain consistent from year to year for the years presented to maintain comparability. Qualitative disclosures shall be considered so that further information can be given about the types of counterparties. When disclosure of the amounts in paragraph 13C(c)-(e) is provided by counterparty, amounts that are individually significant in terms of total counterparty amounts shall be separately disclosed and the remaining individually insignificant counterparty amounts shall be aggregated into one line item.
Other
B53 The specific disclosures required by paragraphs 13C-13E are minimum requirements. To meet the objective in paragraph 13B an entity may need to supplement them with additional (qualitative) disclosures, depending on the terms of the enforceable master netting arrangements and related agreements, including the nature of the rights of set-off, and their effect or potential effect on the entity’s financial position.
Amendment to AASB 132
8 Paragraph 43 is amended as follows (new text is underlined):
43 This Standard requires the presentation of financial assets and financial liabilities on a net basis when doing so reflects an entity’s expected future cash flows from settling two or more separate financial instruments. When an entity has the right to receive or pay a single net amount and intends to do so, it has, in effect, only a single financial asset or financial liability. In other circumstances, financial assets and financial liabilities are presented separately from each other consistently with their characteristics as resources or obligations of the entity. An entity shall disclose the information required in paragraphs 13B-13E of AASB 7 for recognised financial instruments that are within the scope of paragraph 13A of AASB 7.
