When an entity has a legally enforceable right to set off the recognised amounts of a financial asset and financial liability and it intends to settle on a net basis, it:
A) can write off both the asset and the liability.
B) is not entitled to offset the asset and liability.
C) may offset the financial asset and liability.
D) need not present the asset, the liability or the net amount in its financial statements.

Question

Quizplus · Accepted Answer

When an entity has a legally enforceable right to set off the recognised amounts of a financial asset and financial liability and intends to settle on a net basis, it may offset the financial asset and liability. However, it must present the net amount in its financial statements. Option A is incorrect as the entity shouldn't write off both the asset and the liability. Option B is incorrect as the entity has a legally enforceable right to set off. Option D is incorrect as the net amount must be presented.

When an Entity Has a Legally Enforceable Right to Set