The Financial Accounting Standards Board has issued a proposed Accounting Standards Update aimed at clarifying the scope of transactions that would be subject to disclosures about offsetting of assets and liabilities on the balance sheet.

The FASB undertook this clarification project in response to concerns expressed by U.S. stakeholders about an earlier FASB standard’s broad definition of financial instruments. After the standard was finalized, companies realized that many contracts have standard commercial provisions that would equate to a master netting arrangement, significantly increasing the cost of compliance at minimal value to financial statement users.

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