IASB publishes narrow-scope amendment to IAS 1 on the classification of liabilities with covenants
On 31 October 2022, the International Accounting Standards Board (IASB) published amendments to IAS 1 on Non-current Liabilities with Covenants, which sets out the way in which covenants are taken into account in the classification of a debt as current or non-current.
Keywords: Mazars, Thailand, IFRS, IASB, IAS, Liabilities with Covenants
22 December 2022
These amendments clarify that only covenants with which an entity is required to comply by the reporting date affect the classification of a debt as current/non-current. Therefore, classification is not affected if the right to defer settlement of a liability for at least 12 months is subject to compliance with covenants at a date after the reporting date.
These amendments also clarify the disclosures about the nature of covenants, so that users of financial statements can assess the risk that non-current debts accompanied by covenants may become repayable within 12 months.
The amendments are effective for annual reporting periods beginning on or after 1 January 2024, with early adoption permitted. They will be applied retrospectively, in accordance with IAS 8.
These amendments have still to go through the European endorsement process. No date for endorsement by the European Union has yet been announced.
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