Proposals to change liability classifications under IAS 1 are set to be pushed back a year due to Covid-19, IASB announces
The International Accounting Standards Board (IASB) is seeking feedback on the IAS 1 Exposure Draft: Classification of Liabilities as Current or Non-current: Deferral of Effective Date. The Exposure Draft proposes a one-year deferral of the effective date of the amendments to IAS 1 issued in January 2020.
The deadline for submitting comments on the Exposure Draft is 3 June 2020.
In April 2020 the IASB discussed the effect of the Covid-19 pandemic on financial reporting. The Board noted that the pandemic has 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.
The Board noted that deferring the effective date would delay the implementation of the improvements to the classification of liabilities that the amendments intend to bring about. However, the amendments clarify the requirements for presentation of liabilities instead of fundamentally changing the required accounting; recognition and measurement requirements are unaffected by the amendments.
Consequently, the Board concluded that the advantages of a deferral during a time of significant disruption would outweigh the disadvantages. Therefore, to provide entities with operational relief, the Board decided to propose a one-year deferral of the effective date of the amendments to annual reporting periods beginning on or after 1 January 2023.
The IASB 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.
Details of the announcement can be found here.