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IAS 1 Amendments - Classification of Liabilities as Current or Non-current


On 10 February 2015, the IASB published the ED/2005/1 Classification of Liabilities and requested comments by 10 June 2015. The proposed amendments were designed to improve presentation in financial statements by clarifying the criteria for the classification of a liability as either current or non-current. The proposed amendments intend to:

  • clarify that the classification of a liability as either current or non-current is based on the entity’s rights at the end of the reporting period; and
  • make clear the link between the settlement of the liability and the outflow of resources from the entity.

EFRAG’s Comment Letter

EFRAG published its draft comment letter on 24 March 2015 and its final comment letter on 22 June 2015.  EFRAG agreed with the IASB’s objective to clarify the requirements in IAS 1 Presentation of Financial Statements on classification of liabilities and remove some inconsistencies in the terms used in the Standard. In EFRAG’s view, the proposals in the ED were likely to result in greater consistency in applying the principles in IAS 1 and therefore in relevant financial information.

EFRAG also recommended, to avoid further diversity in practice, that the IASB provides additional guidance in situations where the rights to defer settlement of a liability are subject to conditions that occur and are assessed after the end of the reporting period and in situations where liabilities can be settled through the issuance of shares at the option of the counterparty.

Finally, EFRAG suggested that the IASB further explores whether current guidance always provides the most relevant information including in circumstances when rights to defer settlement are not substantive as of the reporting period. It seems most appropriate if the IASB looked at this issue as part of its ongoing activities in the Disclosure Initiative project.

On 29 July 2015, EFRAG published its feedback statement, summarising responses received to its draft comment letter, on the IASB's Exposure Draft.

At its December 2015 meeting, the IASB the feedback on the Exposure Draft Classification of Liabilities (Proposed amendments to IAS 1).

At its April 2016 meeting, the IASB decided that the remaining redeliberations of the comments received  will be held back until after the IASB has redeliberated the definitions of assets and liablities in the Conceptual Framework exposure draft. 

Latest developments​

On 2​3 January 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements (the amendments) to clarify the requirements for classifying liabilities as current or non-current. More specifically:
  • The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists.
  • Management expectations about events after the balance sheet date, for example on whether a covenant will be breached, or whether early settlement will take place, are not relevant.
  • The amendments clarify the situations that are considered settlement of a liability.​

After the issuance of the DEA, the IFRS IC were informed that stakeholders could find it difficult to determine whether it has ‘the right to defer settlement’ when a long-term liability is subject to a condition and the borrower’s compliance with the condition is tested at dates after the end of the reporting period. Therefore, at its December 2020 meeting the IFRS IC discussed this matter by use of examples and published a Tentative Agenda Decision.

​On 22 June 2021 the IASB tentavely​ decided to amend IAS 1 so that: ​​

  • it specifies that if the right to defer settlement for at least 12 months is subject to an entity complying with conditions after the reporting period, then those conditions would not affect whether the right to defer settlement exists at the end of the reporting period (the reporting date) for the purposes of classifying a liability as current or non-current; and 
  • for non-current liabilities subject to conditions, an entity is required to disclose information about:
    • the conditions;
    • whether the entity would comply with the conditions based on its circumstances at the reporting date; and  
    • whether and how the entity expects to comply with the conditions by the date on which they are contractually required to be tested.

The IASB tentatively decided to amend IAS 1 to require that an entity present separately in its statement of financial position ‘non-current liabilities subject to conditions in the next 12 months’. This line item would include liabilities classified as non-current for which the right to defer settlement for at least 12 months is subject to the entity complying with conditions after the reporting date. 

The IASB confirmed deferring the effective date of the amendments by at least one year so that they apply to annual reporting periods beginning no earlier than on or after 1 January 2024.​

The proposal to defer the effective date of IAS 1 can be found in the Project​:​ IAS 1 Classification of Liabilities - Deferral of Effective Date.

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