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Classification of Liabilities - IASB

Date recorded:

At its meeting on February 16-17, 2016, the IASB considered how the proposals in its ED should be applied when conditions in the lending agreement are tested or reviewed after the end of the reporting period. The Board tentatively decided that:

  1. compliance with any conditions in the lending agreement should be assessed as at the reporting date;
  2. any requirement in the lending agreement to test compliance with those conditions at a date after the end of the reporting period should not change the requirement for classification to be based on an assessment of compliance as at the end of the reporting period;
  3. the proposed amendments should require that compliance with a condition as at the end of the reporting period should determine whether a right that is subject to that condition should affect classification (as described in paragraph BC4 of the ED);
  4. when an agreement includes a periodic review clause, in which the lender has the right to demand repayment, the entity has a right to defer settlement only up to the date of the periodic review; and
  5. the Board’s proposals, that classification of a liability is based on rights in existence at the end of the reporting period and compliance with any conditions is assessed as at the end of the reporting period, should not be amended in respect of a periodic review clause.
Review the IASB Update on the IASB's Web site.

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