An entity holding both financial assets and liabilities is allowed to offset and determine fair value on the net position as long as: I the entity holds a net short position
II the entity holds a net long position
III the entity has a documented risk management strategy
IV the entity manages the group of net financial assets and liabilities on a net exposure basis
A) I and II.
B) I and III.
C) II and IV.
D) III and IV.

Question

Quizplus · Accepted Answer

The statement mentions that the entity can offset and determine fair value on the net position if it manages the group of net financial assets and liabilities on a net exposure basis and has a documented risk management strategy. Therefore, options III and IV are correct. The net position can be either net long or net short, so option I or II does not provide a definitive answer.

An Entity Holding Both Financial Assets and Liabilities Is Allowed