What Is "Offsetting" under TFRS 18?

In TFRS standards, "offsetting" means setting an asset and a liability against each other so that only the net amount is presented in the financial statements.

However, this is permitted only under certain conditions. TFRS 18 retains the principle that offsetting is not permitted unless required or permitted by a TFRS; the conditions for offsetting financial assets and liabilities are set out in TAS 32 (Financial Instruments: Presentation).

🎯 What does offsetting mean?

In short:

If you have a receivable of TRY 100 and a payable of TRY 80 to the same customer, presenting them as a net TRY 20 is "offsetting".

But it is not always permitted!

✅ When is offsetting permitted?

Conditions (under TAS 32 / IAS 32):

If there is a legally enforceable right of set-off between the parties

And the company intends to settle on a net basis or to realise the asset and settle the liability simultaneously 👉 Offsetting is permitted. Both conditions must be met.

📘 Example 1: Offsetting financial instruments

Situation:

Company A has a deposit of TRY 100,000 with Bank B.

It also has a loan of TRY 30,000 from the same bank.

Is offsetting possible?

❌ If there is no legally enforceable right of set-off between the parties → offsetting is not permitted.

❌ Even if there is a right of set-off, if the company manages the deposit and the loan separately and does not intend to settle net → offsetting is not permitted.

✅ If the contract includes a "mutual right of set-off" and the company intends to settle these items on a net basis → only the net TRY 70,000 may be presented in the balance sheet.

📘 Example 2: Setting off amounts with a customer

Situation:

The company has a receivable of TRY 10,000 from Customer X.

It also has a payable of TRY 3,000 to the same customer (for example, from returns).

Can the amounts be offset?

❌ If there is no legally enforceable right of set-off between the parties, both items are presented separately.

✅ If the contract includes a "mutual right of set-off" and the amounts are intended to be settled net → only a net receivable of TRY 7,000 may be presented.

🧾 What does TFRS 18 say?

Assets and liabilities, and income and expenses, are not offset unless required or permitted by a TFRS. Disclosures about the offsetting of financial assets and liabilities are set out in TFRS 7.

⚠️ Note:

The approach "there is a mutual receivable and payable, so I will present them net" is subject to conditions and strict rules. This principle already applied under TAS 1 and has been retained unchanged in TFRS 18.