Is the claim an asset or an income

7. Gross principle, prohibition of offsetting and offsetting

a) General

The Offsetting prohibition prohibits the horizontal offsetting of “left and right” in the invoice (balance sheet, income statement). It is strictly forbidden to offset assets against liabilities in the balance sheet and expenses against income in the income statement. If the company has a property encumbered with a mortgage, the gross value of the property must be recorded as an asset and the gross value of the loan as a liability. Merely showing the difference as the economic net value of the property in the invoice is prohibited.

The Offsetting prohibition Forbids a vertical combination of two expense items or two income items, "from top to bottom". The offsetting prohibition is methodically expressed in accounting law by the minimum classification requirements for the income statement and balance sheet: as far as there is a classification, offsetting is not allowed. The offsetting prohibition is intended to prevent the accounts receivable from being extrapolated and thus reducing the transparency of the annual financial statements. Since the balance sheet has to be arithmetically balanced as a sum anyway (the sum of the assets corresponds to the sum of the liabilities), otherwise every balance sheet item could be canceled in extreme cases. It is true Gross principle.

The principle of the most reliable assessment possible is paramount. Conversely, the principle of materiality allows certain deviations from the offsetting prohibition, which, however, should not be significant overall.

b) Sources

See Art. 957a Paragraph 2 Clause 1, 5 as well as Art. 958 Paragraph 1 and Art. 958c Paragraph 1 Clause 7 OR; HWP, Vol. 1, II., p. 63 ff .; Swiss GAAP FER, Framework, Section 14; IAS 1.32 ff.

(1) Swiss GAAP FER

Gross principle (Swiss GAAP FER, Framework, Clause 14)

The annual accounts are based on the gross principle if assets and liabilities, income and expenses are each shown separately. Offsetting may only be made in objectively justified cases and if this does not result in a misleading presentation.

A justified case exists if a technical recommendation requires or permits it and if it reflects the economic content of a business transaction or event.

(2) IAS / IFRS

Offsetting - offsetting (IAS 1.32 ff.)

  1. Assets and liabilities as well as income and expenses may not be netted with one another, unless the netting is required or permitted by a standard or an interpretation.
  1. It is important that assets and liabilities as well as income and expenses are presented separately. Offsetting in the income statement or in the balance sheet reduces the ability of the addressees to understand business transactions, other events or conditions and to estimate the future cash flows of the company, unless the offsetting reflects the economic substance of a business transaction, event or other Conditions. The valuation of assets after the deduction of value adjustments - for example discounts for obsolete stocks and value adjustments of receivables - does not constitute offsetting.
  1. IAS 18, Income, defines income and stipulates that it must be measured at the fair value of the consideration received or to be claimed less the price discounts and volume discounts granted by the company. In the course of its normal business activity, a company also undertakes business transactions that do not lead to any income themselves, but which are incurred together with the main sources of revenue. The results of such business transactions are to be presented by offsetting all income with the associated expenses that arise from the same business transaction, if this presentation reflects the content of the business transaction or event. For example:

(a) Gains and losses from the sale of non-current assets, including financial investments and operating assets, are recognized by deducting the carrying amount of the assets and the related costs to sell from the sales proceeds; as

(b) Expenses in connection with a provision that is recognized in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and is reimbursed in accordance with a contractual agreement with a third party (e.g. supplier warranty) may be offset against the corresponding reimbursement.

  1. In addition, profits and losses that arise from a group of similar business transactions are netted, for example profits and losses from currency conversion or those that arise from financial instruments that are held for trading purposes. However, such gains and losses are shown separately if they are material.