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EFRAG final comment letter on the IASB's exposure draft of amendments to IAS 1 regarding the classification of liabilities

  • EFRAG document (dk green) Image

23 Jun 2015

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the IASB exposure draft (ED) proposing amendments that aim at a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date.

On 10 February 2015, the IASB issued ED/2015/1 Classification of Liabilities (Proposed amendments to IAS 1). The main objectives of the proposal are to (1) clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period, (2) make the link clear between the settlement of a liability and the outflow of resources from an entity, and (3) reorganise the guidance in IAS 1 with respect to classification of liabilities as current or non-current.

In its comment letter, EFRAG supports the proposed amendments as they clarify the existing requirements in IAS 1 that only rights in existence as of the reporting date should be considered when determining the appropriate classification of liabilities. However, to avoid further diversity in practice, EFRAG recommends that additional guidance is provided in situations where the rights to defer settlement of a liability are subject to conditions that are assessed after the reporting period, and in situations where liabilities can settled through the issuance of shares at the option of the counterparty.

For more information, see the press release and final comment letter on the EFRAG’s website.

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