Earlier this year the Financial Accounting Standards Board and the International Accounting Standards Board issued a joint proposal on offsetting assets and liabilities on the balance sheet, also known as “netting.”
This is an important issue. It affects the amount of total assets and liabilities companies report on their balance sheets, and can therefore directly impact the amount of leverage they report and also the debt-to-equity and return on assets ratios, compliance with loan and debt covenants, and other contractual arrangements. Indeed, as reported in the Feb. 2 Compliance Week newsletter, a preliminary analysis by Credit Suisse indicates that, if ...