*Note: The Internationwide Accounting Standards Board (the Board) has subsequently proposed amfinishing IAS 1 Presentation of Financial Statements to clarify just how companies would certainly classify debt via covenants. These proposals would change the requirements presented in its amendments publiburned in January 2020 and likewise defer the reliable date of the 2020 amendments for at least one year. In check out of the proposals, providers should closely consider if beforehand fostering of the 2020 amendments is appropriate.

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To promote consistency in application and clarify the demands on determining if a licapability is existing or non-present, the International Accounting Standards Board (the Board) has actually amended IAS 11.


Companies should revisit their loan agreements to identify whether the classification of their loan liabilities will change – for instance, convertible debt may must be reclassified as ‘current’. Any transforms can have actually a knock-on effect on covenant compliance. With potentially significant impacts ahead, service providers are urged to take activity now.

Gabriela KegaljKPMG’s worldwide IFRS presentation leader


Under existing IAS 1 demands, providers classify a liability as present once they perform not have an unconditional appropriate to defer negotiation of the licapacity for at leastern twelve months after the finish of the reporting duration. As component of its amendments, the Board has removed the need for a right to be unconditional and also rather, currently requires that a ideal to defer negotiation have to have actually substance and also exist at the finish of the reporting duration.

Tright here is restricted guidance on exactly how to determine whether a ideal has actually substance and also the assessment may need administration to exercise interpretive judgement.

The existing requirement to ignore management’s intentions or expectations for settling a licapability as soon as determining its classification is unreadjusted.


A agency classifies a licapability as non-current if it has a right to defer negotiation for at least twelve months after the reporting duration.

The Board has actually now clarified that a ideal to defer exists only if the firm complies with conditions specified in the loan agreement at the finish of the reporting duration, even if the lender does not test compliance until a later on day.

This brand-new necessity might change how companies classify their debt. How the new needs (in specific IAS 1.72A) will use to financial liabilities is unclear. It may change present exercise and lead to more debt being classified as present.

In its current tentative agenda decision2 , the IFRS Interpretations Committee clarifies exactly how the amendments apply to term loans via covenants related to financial position and also uses term loan examples to highlight just how a agency would certainly apply the amendments.


The amendments state that settlement of a licapacity contains transporting a company’s very own equity instruments to the counterparty.

In light of this, the amendments clarify exactly how a company classifies a licapacity that consists of a counterparty conversion choice, which might be recognised as either equity or a licapability individually from the licapability component under IAS 323. Typically, if a licapacity has any type of convariation choices that involve a carry of the company’s very own equity tools, these would impact its classification as present or non-existing. The Board has now clarified that – when classifying liabilities as present or non-existing – a company can overlook just those conversion options that are recognised as equity.

Thus, carriers may need to reassess the classification of liabilities that have the right to be settled by the deliver of the company’s own equity tools – e.g. convertible debt.


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Practice might change – e.g. convertible debt may come to be present – bereason companies may have interpreted the current demands differently, view the example (JPG 210 KB).


The amendments apply retrospectively for annual reporting periods start on or after 1 January 2023. Earlier application is allowed.

Although the amendments are not efficient until 2023, companies will certainly must consider including IAS 84disclosures in their next annual financial statements.

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1 IAS 1Presentation of Financial Statements

2Category of Debt through Covenants as Current or Non-present (IAS 1)

3 IAS 32Financial Instruments: Presentation

4 IAS 8 Accounting Policies, Changes in Accounting Price quotes and also Errors, paragraphs 30-31