On the face of balance sheet and income statement there are certain items which are never considered as offsetting for certain items (something that’s not allowed on most cases as we’ve pointed out in one our posts about offsetting), but compulsory to be included within certain line item groups. If anything, it’s called netting. 

On the balance sheet those items (and the reasons) are as follows:

–     Accumulated depreciation of property, plant and equipment – as the name refers, we’re depreciating the asset group and as such, it’s not acceptable to show the depreciation somewhere else on its own;

–     Impairment provisions are done for specific items and as such, they should be included in the group that’s impaired, with an item that’s impaired;

–     Accumulated amortisation of intangible assets should be treated as depreciation for PPE items (see above) when it comes to classification on the balance sheet;

–     Provisions for inventory obsolescence and bad debts are to be included in the same group as the item that needs the provision.

When it comes to the income statement, the items or netting transactions, which are never considered as offsetting, are as follows:

–       Disposal proceeds and carrying value on disposal are shown as net;

–       Expenditure and related reimbursement under a contractual agreement;

–       Foreign exchange gains and losses;

–       Gains and losses arising on financial instruments held for trading;

–       Releases of provisions against expenses incurred.

If you think about it, there are specific items, which are always tied together – you cannot have one without another (i.e. a provision for bad debt or depreciation for assets) – and as such, should always be disclosed together on the face of statements.