Offsetting

1. Assets and liabilities should not be offset except when offsetting is required or permitted by another Financial Reporting Standard.

2. Items of income and expenses should be offset when, and only when:

   1. Financial Reporting Standard requires or permits it; or

   2. gains, losses and related expenses arising from the same or similar transactions and events are not material, such amounts should be aggregated in accordance with paragraph 29.

3. It is important that both assets and liabilities, and income and expenses, when material, are reported separately. Offsetting in either the income statement or the balance sheet, except when offsetting reflects the substance of the transaction or event, detracts from the ability of users to understand the transactions undertaken and to assess the future cash flows of the enterprise. The reporting of assets net of valuation allowances, for example, obsolescence allowances on inventories and doubtful debts allowance on receivables is not offsetting.

4. In the course of its ordinary activities an enterprise undertakes transactions which do not generate revenue but which are incidental to the main revenue generating activities. The results of such transactions are presented, when this presentation reflects the substance of the transaction or event, by netting any income with related expenses arising on the same transaction. For example:

   1. gains and losses on the disposal of non-current assets, including investments and operating assets, are reported by deducting from the proceeds on disposal the carrying amount of the asset and related selling expenses;

   2. expenditure that is reimbursed under a contractual arrangement with a third party (a sub-letting agreement, for example) is netted against the related reimbursement; and

   3. extraordinary items may be presented net of related taxation and minority interest with the gross amounts shown in notes.

5. In addition, gains and losses arising from a group of similar transactions are reported on a net basis, for example, foreign exchange gains and losses or gains and losses arising on financial instruments held for trading purposes. Such gains and losses are, however, reported separately if their size, nature or incidence is such that separate disclosure is required by FRS 108₂₀₀₄, Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies.

Comparative Information

1. Unless a Financial Reporting Standard permits or requires otherwise, comparative information should be disclosed in respect of the previous period for all numerical information in the financial statements. Comparative information should be included in narrative and descriptive information when it is relevant to an understanding of the current period's financial statements.

2. In some cases narrative information provided in the financial statements for the previous period(s) continues to be relevant in the current period. For example, details of a legal dispute, the outcome of which was uncertain at the last balance sheet date and is yet to be resolved, are disclosed in the current period. Users benefit from information that the uncertainty existed at the balance sheet date and the steps that have been taken during the period to resolve the uncertainty.

3. When the presentation or classification of items in the financial statements is amended, comparative amounts should be reclassified, unless it is impracticable to do so, to ensure comparability with the current period, and the nature, amount and reason for, any reclassification should be disclosed. When it is impracticable to reclassify comparative amounts, an enterprise should disclose the reason for not reclassifying and the nature of the changes that would have been made if amounts were reclassified.

4. Circumstances may exist when it is impracticable to reclassify comparative information to achieve comparability with the current period. For example, data may not have been collected in the previous period(s) in a way which allows reclassification and it may not be practicable to recreate the information. In such circumstances, the nature of the adjustments to comparative amounts that would have been made are disclosed. FRS 108₂₀₀₄, Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies, addresses the issue of required adjustments subsequent to a change in accounting policy that is applied retrospectively.