Reasons provided in AASB 132 for the required treatment of the set-off of assets and liabilities include:
A) The gross basis is generally preferred, except in the situation outlined because the parties to the arrangement have a legal obligation that takes precedence over reporting form.
B) Setting off an obligation against an asset in the circumstances described allows the entity to manage its risk exposure and should be encouraged by reporting requirements.
C) While the gross basis shows more accurately the detailed transaction, the effect on ratios that may be used to analyse the financial statements of the reporting entity means that they will no longer reflect the economic substance of the arrangement.
D) The presentation of the asset and the liability on a net basis reflects more appropriately the amounts and timing of future cash flows.
E) None of the given answers.

Question

Quizplus · Accepted Answer

The net basis presentation reflects the economic reality of the arrangement by showing the actual amounts and timing of future cash flows, which is a key reason for allowing set-off under AASB 132.

Reasons Provided in AASB 132 for the Required Treatment of the Set-Off