IASB Publishes the Exposure Draft ED/2020/3 to Defer the Effective Date of the Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current

On 4 May 2020, the IASB has published for public comment the Exposure Draft ED/2020/3 to defer the effective date of the Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current by one year to annual reporting periods beginning on or after 1 January 2023 (further information). An earlier application of the amendments to IAS 1 shall continue to be permitted.

This is proposed because applying the amendments could affect some entities’ compliance with loan covenants. By proposing a delay of the effective date by one year, the IASB wants to ensure that entities – given the current corona pandemic – have enough time to re-negotiate covenants until the amendments become effective.

Comments can be submitted to the IASB until 3 June 2020.

In January 2020, the IASB issued Classification of Liabilities as Current or Non-Current (Amendments to IAS 1). These narrow-scope amendments clarify that the classification of liabilities as current or non-current requires an assessment of whether an entity has the right to defer settlement of a liability and not whether the entity will exercise that right, i.e. classification is unaffected by management intentions or expectations.