Amendment to IAS 1

On 10 February 2015 the IASB published an exposure draft aiming to clarify the criteria for classifying liabilities as either current or non-current on the balance-sheet. This exposure draft takes the form of a limited draft amendment to IAS 1 – Presentation of Financial Statements.

Keywords: Mazars, Thailand, IFRS, FASB, ASU, IASB, IAS

15 May 2015

Readers may recall that in May 2012 the IASB published a draft IAS 1 amendment as part of its Annual Improvements programme. The standard-setter proposed to create a link between the classification of a liability as current or non-current and the provisions on the ‘derecognition’ of a financial liability in IAS 39. This proposal was abandoned as a result of the comments received during the written consultation process.

The 2015 exposure draft clarifies that the classification of the liability is based on the entity’s rights at the end of the reporting period; the liability is only classified as non-current if at that date there is a right to defer settlement for at least 12 months after the reporting period.

If the obligation is refinanced, this right - as we understand it - may result either from a clause existing from inception in the initial loan contract, or from an amendment to the initial arrangement concluded before the reporting date (that is, when renegotiating the term of the initial loan).

The draft amendment also clarifies that the settlement of the liability may take any of the following forms: cash, equities, or other assets or services which extinguish the liability.

The exposure draft proposes that the amendment should be applicable retrospectively with effect from an as-yet undecided date. The comments period runs until 10 June 2015.

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