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

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05 Jun, 2015

The European Securities and Markets Authority (ESMA) has published its 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..

ESMA supports the proposals in the ED but believes that “there is a need to further improve the requirements on classification of liabilities as either current or non-current when rights in place at the reporting date are subject to a condition”.  ESMA also encourages the IASB, as part of this amendment, to “explicitly address” the criteria for classification of liabilities with uncertain timing as current or non-current.

Further comments are included within the full comment letter which is available on the ESMA website.

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