IASB to propose amendment to IAS 1 with respect to classification of debt with covenants as current on non-current

During its meeting held on 22-23 June 2021, the IASB discussed an amendment to IAS 1 Presentation of Financial Statements.

In January 2020, the IASB had issued amendments to IAS 1, which clarified how an entity classifies liabilities as current or non-current. The amendments were effective for the annual reporting periods beginning on or after 1 January 2023. BDO issued an IFR Bulletin on these amendments, which is available here.

In response to feedback and enquiries from stakeholders, in December 2020, IFRIC issued a Tentative Agenda Decision (TAD), which analysed the applicability of the amendments to three scenarios. However, due to the feedback received and various concerns raised about the outcome of applying the amendment, IFRIC did not finalise the tentative agenda decision and referred the matter to the IASB.

Considering the feedback received, the IASB staff recommended to the IASB to amend the requirements in IAS 1 with respect to the classification of liabilities subject to conditions and disclosure of information about such conditions. The IASB staff also recommended deferral of the effective date of the 2020 amendment by at least one year to annual reporting periods beginning no earlier than on or after 1 January 2024.

The IASB considered these recommendations in its meeting held on 22-23 June 2021 and has accepted the recommendations to amend the requirements in IAS 1 and defer the effective date of the 2020 amendment.

The meeting summary will be made available in due course. The staff paper on this agenda item may be accessed here.