FASB Proposes Amendments Relating to Classification of Debt that would align US GAAP and IFRS more closely
02 October 2019
The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standard Update (ASU) that intends to improve guidance on how entities determine whether debt should be classified as current or non-current.
The proposed guidance would bring US GAAP’s requirements more closely in line with IAS 1’s principle-based framework.
The exposure draft notes that the FASB referenced IAS 1 guidance in developing its own proposals. Additionally, the proposed guidance on applying the debt classification principle to post-balance sheet refinancing of debt is similar to the guidance in IAS 1.
Despite the proposed new ASU, differences would still exist between US GAAP and IFRS relating to debt classification with covenant violations.
The IASB is also planning to update IAS 1 relating to classification of liabilities as current or non-current (see project plan here). An exposure draft is expected from the IASB in Q4 of 2019.
The proposed ASU can be accessed here.