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IASB proposes clarifications to liability classification under IAS 1

  • IASB document Image

Feb 10, 2015

The IASB has published an exposure draft (ED) that proposes amendments to IAS 1, “Presentation of Financial Statements.” The proposal suggests a more general approach to the classification of liabilities under IAS 1 on the basis of the contractual arrangements in place as of the reporting date. Comments on the ED are due by June 10, 2015.


The IASB orig­i­nally addressed this topic in its May 2012 ED related to the 2010-2012 cycle of its annual im­prove­ments project. Specifically, the IASB had proposed amend­ments to IAS 1.73 “to clarify that a liability is clas­si­fied as non-cur­rent if an entity expects, and has the dis­cre­tion, to refinance or roll over an oblig­a­tion for at least twelve months after the reporting period under an existing loan facility with the same lender, on the same or similar terms.” During 2013, however, the IASB decided not to finalize the amendment but instead pursued a nar­row-scope project to refine the existing guidance in IAS 1 on when li­a­bil­i­ties should be clas­si­fied as current.

Proposed changes

The amend­ments proposed in the IASB’s new ED would:

  • Indicate that the “clas­si­fi­ca­tion of li­a­bil­i­ties as current or non-cur­rent is based on rights that are in existence at the end of the reporting period” by amending IAS 1.69(d) and IAS 1.73 so that both para­graphs refer to the “right to defer set­tle­ment” and both specify that only rights in place “at the end of the reporting period” affect such classification.
  • Clarify “the link between the set­tle­ment of the liability and the outflow of resources from the entity” by incorporating guidance into IAS 1.69 explaining that set­tle­ment refers to the “transfer to the coun­ter­party of cash, equity in­stru­ments, other assets or services.”
  • Re­or­gan­iz­e the guidance in IAS 1 regarding clas­si­fi­ca­tion of li­a­bil­i­ties as current or noncur­rent by deleting IAS 1.74–76 and moving the provisions from these paragraphs to the expanded and renum­bered para­graphs IAS 1.72R and IAS 1.73R “so that similar examples are grouped together.”

Effective date and tran­si­tion re­quire­ments

Although the ED does not propose an effective date, it indicates that the amend­ments would be applied ret­ro­spec­tively and that early ap­pli­ca­tion would be permitted.

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