Academic journal article Journal of Accountancy

FASB Issues ED on Repurchase-Related Offsetting

Academic journal article Journal of Accountancy

FASB Issues ED on Repurchase-Related Offsetting

Article excerpt

The Financial Accounting Standards Board published an exposure draft of its proposed interpretation, Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements.

The ED interprets Accounting Principles Board Opinion no. 10, Omnibus Opinion-1966, and modifies FASB Interpretation no. 39, Offsetting of Amounts Related to Certain Contracts.

Robert Sonnelitter, FASB project manager, explained the proposal "would permit offsetting payables and receivables representing repurchase agreements and reverse repurchase agreements only if they have the same settlement date, are executed with the same counterparty in accordance with a master netting arrangement, involve securities that exist in `book entry' form and settle on securities transfer systems that have the same key elements and operating characteristics as the Fedwire Securities Transfer System." (The Fedwire system is structured so the record of security ownership is transferred and the associated cash payment is made based on the gross amount of each transaction. That system is equipped to settle transactions in different securities separately; that is, only on an individual basis.

According to the ED, after the board had discussions with the accounting standards executive committee (AcSEC) of the American Institute of CPAs and representatives of the securities industry about implementing Interpretation no. …

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