However, a net measurement of assets after deducting provisions, such as provisions for doubtful debts in respect of debtors, is not considered an offset (Section 33 of IAS Standard 1). In any other scenario, the asset and liability should be presented separately.
- In this case, Agrexco offset the special payments to growers, which were recognized as an asset in the internal accounting system, against its obligations to them or to suppliers of agricultural produce, and thus the existence of the asset disappeared from the balance sheet: the amounts were deducted from the reports, so that the reader of the financial report could not know at all about their existence or scope.
- I accept the plaintiffs' argument that this offset does not meet the conditions of the standardization: no enforcement contractual right was presented that grants Agrexco the right to offset its debt to the growers and the advances it paid them. On the contrary: the company did not have a legal right to the very ability to demand the refund of the "advances". The intention to liquidate Bento was also not fulfilled in practice: the payments were made as advances or unilateral grants, and not as part of an agreed offset arrangement. Therefore, according to the accounting rules accepted at the time, it was forbidden to offset the special payments against the liabilities.
- In Prof. Eden's opinion as well, he does not deny the level of defective disclosure, but only explains that this defect does not justify a reservation on the part of the auditor (paragraphs 7.8 and 7.9 of the Eden 2012 opinion):
"7.8 I found that the level of disclosure given by the Company to the manner in which the accounting handled of advances to ensure the continued production of the products was not sufficient and I will elaborate:
To the best of my understanding, it was appropriate to give a disclosure in the explanation of the accounting policy to the company's accounting policy in relation to these advances, similar to the disclosure given by the company in the explanation of the accounting policy to the manner in which the accounting treatment of "advances on the inventory account".