From amendments listed above one point to highlight here is clarification for a right to defer settlement - the Board addressed the clarification by removing ‘unconditional’ in the fourth criterion in paragraph 69 (as stated at point (4) in the first section), which states that a liability is current if an entity ‘does not have an unconditional right to defer settlement of the liability for at least twelve months’. The Board explained that a right to defer settlement is rarely unconditional, as such rights often are conditional on compliance with covenants. Therefore, the Board decided that if an entity’s right to defer settlement of a liability is subject to the entity complying with specified conditions, the entity has a right to defer settlement of the liability at the end of the reporting period if it complies with those conditions at that date.
From when these amendments are effective?
The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2022. Retrospective application of the amendments are required as per IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is permitted, however, in May 2020 proposed deferral of the effective date to 1 January 2023.
Reason for deferral effective date?
The Board discussed the effect of the covid-19 pandemic on financial reporting. The Board noted that the pandemic had created pressures that could delay the implementation of any changes in classification resulting from the application of these amendments. It could also delay the start and extend the duration of the renegotiation of loan covenants.
Are there any further changes to previously notified amendments?
No, the Board is not proposing any changes to the Classification of Liabilities as Current or Non-current amendments issued in January 2020 other than the deferral of the effective date. Earlier application of the amendments will continue to be permitted.