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Offsetting (or netting) in the financial statements
Publication date: 08 Dec 2023
uk Year end reminders
Offsetting (sometimes referred to as ‘netting’) is the net presentation of separate assets and liabilities or income and expenses in the financial statements. Similar considerations apply to the reporting of gross or net cash flows in the cash flow statement.
Offsetting and netting are generally prohibited, except where expressly required or permitted by accounting standards. This is because it detracts from users’ ability to both gain a full and proper understanding of the transactions, other events and conditions that have occurred and to assess an entity’s future cash flows.
Where offsetting is permitted, there are usually specific criteria that must be met in order to offset. Furthermore, in most cases where the criteria for offsetting are met, offsetting must be applied – it is not a choice.
Relevant guidance with respect to the areas where we most commonly see offsetting are as follows:
Offsetting in relation to: | IFRS guidance |
|---|---|
General offsetting, including in the income statement
| |
Financial instruments
| |
Current and deferred tax
| |
Cash flow statement
|
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