Non-current Liabilities with Covenants (Amendments to IAS 1) [Completed]

Effective date:

The amendments are effective for reporting periods beginning on or after January 1, 2024. The amendments are applied retrospectively in accordance with IAS 8 and earlier application is permitted.

Last up­dated:

December 2022

Overview

At its meeting on June 23, 2021, the Board decided to amend IAS 1, Presentation of Financial Statements, in response to new information provided by respondents re the tentative Agenda Decision Classification of Debt with Covenants as Current or Non-current. At a future meeting the Board discussed the transition requirements for the proposed amendments, as well as the Board’s compliance with applicable due process steps.

  • Classification and disclosure

The Board tentatively 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 (for example, the nature of and date by which the entity must comply with the condition);
    • 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.
  • Separate presentation

The Board 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.

  • Further clarification

The Board tentatively decided to amend IAS 1 to clarify that an entity does not have a right to defer settlement at the reporting date when the related liability could become repayable within 12 months:

  • at the discretion of the counterparty or a third party (for example, when a loan is callable by the lender at any time without cause); or
  • if an uncertain future event occurs (or does not occur) and the event’s occurrence (or non-occurrence) is unaffected by the entity’s future actions (for example, when the liability is a financial guarantee or insurance contract liability).
  • Deferral of the effective date of the 2020 amendments to IAS 1

The Board tentatively decided to amend IAS 1 to defer the effective date of the 2020 amendments to no earlier than January 1, 2024.

In October 2022, the IASB issued Non-current Liabilities with Covenants,
(Amendments to IAS 1), to clar­ify how con­di­tions with which an en­tity must com­ply within twelve months af­ter the re­port­ing pe­riod af­fect the clas­si­fi­ca­tion of a li­a­bil­ity. The amend­ments are ef­fec­tive for re­port­ing pe­ri­ods be­gin­ning on or af­ter Jan­u­ary 1, 2024.

On December 15, 2022, the amendments to IAS 1 were issued by the AcSB to the CPA Canada Handbook – Accounting Part I. The amend­ments are ef­fec­tive for re­port­ing pe­ri­ods be­gin­ning on or af­ter Jan­u­ary 1, 2024. The amend­ments are ap­plied ret­ro­spec­tively in ac­cor­dance with IAS 8 and ear­lier ap­pli­ca­tion is per­mit­ted.

 

Other De­vel­op­ments

December 2022

On December 15, 2022, the amendments to IAS 1 were issued by the AcSB to the CPA Canada Handbook – Accounting Part I.

October 2022

On October 31, 2022, the IASB published Non-current Liabilities with Covenants (Amendments to IAS 1) to clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability. The amendments are effective for reporting periods beginning on or after January 1, 2024.

On October 25, 2022, the IASB staff updated the work plan to indicate that the Board plans to issue the amendments to its IFRSs in October 2022.

September 2022

On September 26, 2022, the IASB staff updated the work plan to indicate that the Board plans to issue the amendments to its IFRSs in November 2022.

April 2022

On April 29, 2022, the IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft Feedback in June 2022.

January 2022

On January 28, 2022, the IASB staff updated the Work Plan to indicate that the Board plans to review the Exposure Draft Feedback in Q2 2022.

December 2021

On December 16, 2021, the AcSB issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Canadian stakeholders who would like their feedback considered prior to the AcSB finalizing its comment letter are encouraged to submit their comments to the AcSB by March 4, 2022.

November 2021

On November 19, 2021, the IASB published the exposure draft Non-current Liabilities with Covenants (Proposed amendments to IAS 1) to clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability. The deadline for submitting comments is March 21, 2022.

September 2021

On September 27, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in November 2021.

July 2021

On July 23, 2021, the IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft in October 2021.

June 2021

At its meeting on June 23. 2021, the Board decided to amend IAS 1, Presentation of Financial Statements, in response to new information provided by respondents re the tentative Agenda Decision Classification of Debt with Covenants as Current or Non-current.  

 

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