# ASC 815-10-45: Derivatives and Hedging — Overall — 45 Other Presentation Matters

Source: FASB Accounting Standards Codification, Basic View

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## ASC 815-10-45: 45 Other Presentation Matters

[Read section](https://asc.understandingaccounting.org/asc/815/10/#45-other-presentation-matters)

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#### Balance Sheet—Netting

##### [815-10-45-1](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-1)

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Subtopic 210-20 establishes the criteria for offsetting amounts in the balance sheet.

##### [815-10-45-2](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-2)

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None of the provisions in this Subtopic support netting a hedging derivative's asset (or liability) position against the hedged liability (or asset) position in the balance sheet.

##### [815-10-45-3](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-3)

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The following guidance addresses offsetting certain amounts related to derivative instruments. For purposes of this guidance, derivative instruments include those that meet the definition of a [derivative instrument](https://asc.understandingaccounting.org/glossary/d/#derivative-instrument "Paragraphs 815-10-15-83815-10-15-84815-10-15-85815-10-15-86815-10-15-87815-10-15-88815-10-15-89815-10-15-90815-10-15-91815-10-15-92815-10-15-93815-10-15-94815-10-15-95815-10-15-96815-10-15-97815-10-15-98815-10-15-99815-10-15-100815-10-15-101815-10-15-102815-10-15-103815-10-15-104815-10-15-105815-10-15-106815-10-15-107815-10-15-108815-10-15-109815-10-15-110815-10-15-111815-10-15-112815-10-15-113815-10-15-114815-10-15-115815-10-15-116815-10-15-117815-10-15-118815-10-15-119815-10-15-120815-10-15-121815-10-15-122815-10-15-123815-10-15-124815-10-15-125815-10-15-126815-10-15-127815-10-15-128815-10-15-129815-10-15-130815-10-15-131815-10-15-132815-10-15-133815-10-15-134815-10-15-135815-10-15-136815-10-15-137815-10-15-138815-10-15-139 define the term derivative instrument.") but are not included in the scope of this Subtopic.

##### [815-10-45-4](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-4)

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[Paragraph superseded by Accounting Standards Update No. 2018-09](https://asc.understandingaccounting.org/updates/asu-2018-09/).

##### [815-10-45-5](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-5)

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In accordance with paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1), but without regard to the condition in paragraph [210-20-45-1(c)](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1), a reporting entity may offset fair value amounts recognized for derivative instruments and [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instrument(s) recognized at fair value executed with the same counterparty under a master netting arrangement. Solely as it relates to the right to reclaim cash collateral or the obligation to return cash collateral, fair value amounts include amounts that approximate fair value. The preceding sentence shall not be analogized to for any other asset or liability. The fair value recognized for some contracts may include an accrual component for the periodic unconditional receivables and payables that result from the contract; the accrual component included therein may also be offset for contracts executed with the same counterparty under a master netting arrangement. A master netting arrangement exists if the reporting entity has multiple contracts, whether for the same type of derivative instrument or for different types of derivative instruments, with a single counterparty that are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract.

##### [815-10-45-6](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-6)

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A reporting entity shall make an accounting policy decision to offset fair value amounts pursuant to the preceding paragraph. The reporting entity's choice to offset or not must be applied consistently. A reporting entity shall not offset fair value amounts recognized for derivative instruments without offsetting fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral. A reporting entity that makes an accounting policy decision to offset fair value amounts recognized for derivative instruments pursuant to the preceding paragraph but determines that the amount recognized for the right to reclaim cash collateral or the obligation to return cash collateral is not a fair value amount shall continue to offset the derivative instruments.

##### [815-10-45-7](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-7)

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A reporting entity that has made an accounting policy decision to offset fair value amounts is not permitted to offset amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against net derivative instrument positions if those amounts either:

1.  a
    
    Were not fair value amounts
    
2.  b
    
    Arose from instruments in a master netting arrangement that are not eligible to be offset.

#### Income Statement Classification

##### [815-10-45-8](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-8)

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Except for the guidance in the following paragraph and paragraph [815-10-45-10](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-10), this Subtopic does not provide guidance about the classification in the income statement of a derivative instrument's gains or losses, including the adjustment to fair value for a contract that newly meets the definition of a derivative instrument.

##### [815-10-45-9](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-9)

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Gains and losses (realized and unrealized) on all derivative instruments within the scope of this Subtopic shall be shown net when recognized in the income statement, whether or not settled physically, if the derivative instruments are held for [trading purposes](https://asc.understandingaccounting.org/glossary/t/#trading-purposes "The determination of what constitutes trading purposes is based on the intent of the issuer or holder and shall be consistent with the definition of trading in paragraph 320-10-25-1(a)."). On an ongoing basis, reclassifications into and out of trading shall be rare.

##### [815-10-45-10](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-10)

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Subsequent changes in the fair value of an option that was granted to a grantee and is subject to or became subject to this Subtopic shall be included in the determination of net income. (See paragraphs [815-10-55-46 through 55-48A](https://asc.understandingaccounting.org/asc/815/10/#815-10-55-46) and

[815-10-55-54 through 55-55](https://asc.understandingaccounting.org/asc/815/10/#815-10-55-54)

for discussion of such an option.) Changes in fair value of the option award before vesting shall be characterized as compensation cost in the grantor's income statement. Changes in fair value of the option award after vesting may be reflected elsewhere in the grantor's income statement.

#### Cash Flow Statement Classification

##### [815-10-45-11](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-11)

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An instrument accounted for as a derivative instrument under this Subtopic that, at its inception, includes off-market terms, or requires an up-front cash payment, or both often contains a financing element. Identifying a financing element within a derivative instrument is a matter of judgment that depends on facts and circumstances.

##### [815-10-45-12](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-12)

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If an other-than-insignificant financing element is present at inception—other than a financing element inherently included in an at-the-market derivative instrument with no prepayments (that is, the forward points in an at-the-money forward contract)—then the borrower shall report all cash inflows and outflows associated with that derivative instrument in a manner consistent with financing activities as described in paragraphs

[230-10-45-14 through 45-15](https://asc.understandingaccounting.org/asc/230/10/#230-10-45-14)

.

##### [815-10-45-13](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-13)

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An at-the-money plain-vanilla interest rate swap that involves no payments between the parties at inception would not be considered as having a financing element present at inception even though, due to the implicit forward rates derived from the yield curve, the parties to the contract have an expectation that the comparison of the fixed and variable legs will result in payments being made by one party in the earlier periods and being made by the counterparty in the later periods of the swap's term.

##### [815-10-45-14](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-14)

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If a derivative instrument is an at-the-money or out-of-the-money option contract or contains an at-the-money or out-of-the-money option contract, a payment made at inception to the writer of the option for the option's time value by the counterparty shall not be viewed as evidence that the derivative instrument contains a financing element.

##### [815-10-45-15](https://asc.understandingaccounting.org/asc/815/10/#815-10-45-15)

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In contrast, if the contractual terms of a derivative instrument have been structured to ensure that net payments will be made by one party in the earlier periods and subsequently returned by the counterparty in the later periods of the derivative instrument's term, that derivative instrument shall be viewed as containing a financing element even if the derivative instrument has a fair value of zero at inception.