The Institute of Chartered Accountants of India (ICAI) has proposed the amendments to IAS 1 in respect of Non-current Liabilities with Covenants.
Indian Accounting Standards (Ind AS) are based on the IFRS Standards issued by the International Accounting Standards Board (IASB) of IFRS Foundation. The IASB, before issuing the new/amendments to IFRS Standards, issues consultative documents [such as Discussion Paper (DP), Exposure Draft (ED) etc] seeking public comments from across the globe. The Accounting Standards Board (ASB) of ICAI with the aim to provide an opportunity to the various stakeholders in India to raise their concerns at the initial International Standard-setting stage itself, invites comments on the consultative documents issued by the IASB. It also helps the Indian stakeholders to be aware of the preparations required for implementation of Ind AS in line with adhering to global timelines.
Recently, the IASB has issued the Exposure Draft for public comments.
IAS 1 Presentation of Financial Statements requires that, for an entity to classify a liability as non-current, the entity must have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period (right to defer settlement).
In January 2020 the IASB issued Classification of Liabilities as Current or Non-current (2020 amendments). The 2020 amendments clarified aspects of how entities classify liabilities as current or non-current; in particular, how an entity assesses whether it has the right to defer settlement of a liability when that right is subject to compliance with specified conditions (often referred to as ‘covenants’) within 12 months after the reporting period.
In response to questions from stakeholders, the IFRS IC published a tentative agenda decision explaining how to apply the 2020 amendments to particular fact patterns. Respondents to the tentative agenda decision raised concerns about the outcomes and potential consequences of the 2020 amendments in some situations.
Having considered the new information, the IASB decided to propose narrow-scope amendments to IAS 1. The proposed amendments would specify that conditions with which an entity must comply within 12 months after the reporting period do not affect classification of a liability as current or non-current. Instead, entities would present separately, and disclose information about, non-current liabilities subject to such conditions.
The proposed amendments would also defer the effective date of the 2020 amendments so that entities are not required to change their assessment of the classification of liabilities before the proposed amendments are in effect.
The Comments may be submitted through electronic mode by Click on http://www.icai.org/comments/asb/ to submit a comment online (Preferred method), Email (commentsasb@icai.in) or by post at Secretary, Accounting Standards Board, The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi 110 002.
Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
