The principal document is a draft or bill of exchange

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Unformatted text preview: fy its acceptance of the liability to make payment on the draft on its due date. CE 7-4 According to FASB ASC 210-20-45 > Right of Setoff Criteria 45-1 A right of setoff exists when all of the following conditions are met: a. Each of two parties owes the other determinable amounts. b. The reporting party has the right to set off the amount owed with the amount owed by the other party. c. The reporting party intends to set off. d. The right of setoff is enforceable at law. 45-2 45-3 A debtor having a valid right of setoff may offset the related asset and liability and report the net amount. If the parties meet the criteria specified in paragraph 210-20-45-1, specifying currency or interest rate requirements is unnecessary. However, if maturities differ, only the party with the nearer maturity could offset because the party with the longer term maturity must settle in the manner that the other party selects at the earlier maturity date. If a party does not intend to set off even though the ability to set off exists, an offsetting presentation in the statement of financial position is not representationally faithful. Acknowledgment of the intent of set off by the reporting party and, if applicable, demonstration of the execution of the setoff in similar situations meet the criterion of intent. 45-4 45-5...
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This note was uploaded on 01/20/2013 for the course ACCOUNTING 301 taught by Professor Gramlich during the Fall '11 term at University of Southern Maine.

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