# ASC 210-20-05: Balance Sheet — Offsetting — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

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## ASC 210-20-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/210/20/#05-overview-and-background)

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##### [210-20-05-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-05-1)

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This Subtopic provides criteria for offsetting amounts related to certain contracts and provides guidance on presentation. It is a general principle of accounting that the offsetting of assets and liabilities in the balance sheet is improper except if a [right of setoff](https://asc.understandingaccounting.org/glossary/r/#right-of-setoff "A right of setoff is a debtor's legal right, by contract or otherwise, to discharge all or a portion of the debt owed to another party by applying against the debt an amount that the other party owes to the debtor.") exists.

##### [210-20-05-2](https://asc.understandingaccounting.org/asc/210/20/#210-20-05-2)

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The general principle that the offsetting of assets and liabilities is improper except where a right of setoff exists is usually thought of in the context of unconditional receivables from and payables to another party. That general principle also applies to conditional amounts recognized for contracts under which the amounts to be received or paid or items to be exchanged in the future depend on future interest rates, future exchange rates, future commodity prices, or other factors.

#### Repurchase and Reverse Repurchase Agreements

##### [210-20-05-3](https://asc.understandingaccounting.org/asc/210/20/#210-20-05-3)

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As defined, [repurchase agreements accounted for as collateralized borrowings](https://asc.understandingaccounting.org/glossary/r/#repurchase-agreement-accounted-for-as-a-collateralized-borrowing "A repurchase agreement (repo) refers to a transaction in which a seller-borrower of securities sells those securities to a buyer-lender with an agreement to repurchase them at a stated price plus interest at a specified date or in specified circumstances. A repurchase agreement accounted for as a collateralized borrowing is a repo that does not qualify for sale accounting under Topic 860. The payable under a repurchase agreement accounted for as a collateralized borrowing refers to the amount of the seller-borrower's obligation recognized for the future repurchase of the securities from the buyer-lender. In certain industries, the terminology is reversed; that is, entities in those industries refer to this type of agreement as a reverse repo.") and [reverse repurchase agreements accounted for as collateralized borrowings](https://asc.understandingaccounting.org/glossary/r/#reverse-repurchase-agreement-accounted-for-as-a-collateralized-borrowing "A reverse repurchase agreement accounted for as a collateralized borrowing (also known as a reverse repo) refers to a transaction that is accounted for as a collateralized lending in which a buyer-lender buys securities with an agreement to resell them to the seller-borrower at a stated price plus interest at a specified date or in specified circumstances. The receivable under a reverse repurchase agreement accounted for as a collateralized borrowing refers to the amount due from the seller-borrower for the repurchase of the securities from the buyer-lender. In certain industries, the terminology is reversed; that is, entities in those industries refer to this type of agreement as a repo.") represent collateralized borrowing and lending transactions. These transactions may involve a master netting agreement between the parties. This Subtopic addresses offsetting for such borrowing and lending transactions.