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Classification of Liabilities – International Accounting Standards Board

Date recorded:

At its meeting on November 15, 2018, the IASB continued its discussion of comments on the Exposure Draft. The Board tentatively decided that, as proposed in the Exposure Draft, IAS 1 should require an entity to classify a liability as current if the entity does not have a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period.

The Board tentatively decided to add to IAS 1 a reminder that an entity’s right to defer settlement must have substance. The Board tentatively decided to clarify in IAS 1 that:

  1. an entity’s right to defer settlement is not affected by: (i) management’s expectations about whether the entity will exercise that right; and (ii) settlement of a liability between the end of the reporting period and the date the financial statements are authorised for issue; and
  2. although these factors do not affect the classification of a liability, an entity may need to disclose information about them to comply with the disclosure requirements of IFRS Standards. The Board discussed differences between the requirements of IAS 1 and proposed requirements on the classification of debt being developed by the US FASB and tentatively decided not to consider further amendments to IAS 1. The Board will discuss classification of liabilities with equity-settlement features at a future meeting.

Review the IASB Update and podcast on the Board's Web site.

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