Which of the following are examples where the conditions for offsetting a financial asset and a financial liability are generally not satisfied?
I. Financial assets pledged as collateral for non-recourse financial liabilities.
II. The combination of a number of different financial instruments to emulate the features of a single financial instrument.
III. Financial liabilities for obligations expected to be recovered from a third party such as an insurance company.
A) I and III only
B) II and III only
C) I and II only.
D) I, II and III.

Question

Quizplus · Accepted Answer

The conditions for offsetting a financial asset and a financial liability are generally not satisfied in all three scenarios: I) Financial assets pledged as collateral for non-recourse financial liabilities do not usually meet the strict criteria for offsetting because the asset is not legally set off against the liability; it is merely pledged as security. II) Combining different financial instruments to emulate a single financial instrument does not meet the criteria for offsetting because each instrument remains separate and distinct, despite their combined effect. III) Financial liabilities expected to be recovered from a third party, such as through insurance, do not meet the offsetting criteria because the obligation still exists with the entity until the third party fulfills the obligation.

Which of the Following Are Examples Where the Conditions for Offsetting