United States

IASB clarifies requirements for classifying liabilities


The International Accounting Standards Board (IASB) has issued narrow-scope amendments to International Accounting Standard (IAS) 1, Presentation of Financial Statements, which clarify how to classify debt and other liabilities as current or non-current. The amendments clarify one of the criteria in IAS 1 for classifying a liability as non-current—that is, the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendments include:

  • Specifying that an entity’s right to defer settlement must exist at the end of the reporting period
  • Clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement
  • Clarifying how lending conditions affect classification
  • Clarifying requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments

The amendments are effective for annual periods beginning on or after January 1, 2022. Earlier application is permitted. 

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