ICAI Proposes Amendments to IAS 1 - Non-current Liabilities with Covenants

ICAI Proposes Amendments to IAS 1 - Non-current Liabilities with Covenants The Institute of Chartered Accountants of India (ICAI) has proposed amendments to IAS 1 in respect of Non-current Liabilities with Covenants. Indian Accounting Standards (Ind AS) are based on the International Accounting Standards Board (IASB) of the IFRS Foundation. Before issuing new/amendments to IFRS Standards, the IASB publishes consultation materials [such as Discussion Papers (DP), Exposure Drafts (ED), and so on] to solicit public feedback from throughout the world. The Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) requests views on the IASB's consultative materials, with the goal of allowing diverse stakeholders in India to voice their concerns early in the International Standard-setting process. It also informs Indian stakeholders on the preparations needed to execute the Indian AS in accordance with global deadlines. The IASB just released the following Exposure Draft for public comment: To classify an obligation as non-current, a business must have the right to defer settlement of the liability for at least 12 months after the end of the reporting period, according to IAS 1 Presentation of Financial Statements (right to defer settlement). The IASB published Classification of Liabilities as Current or Non-current in January 2020. (2020 amendments). The 2020 amendments clarified aspects of how entities classify liabilities as current or non-current, including how an entity determines whether it has the right to defer settlement of a liability if that right is conditional on compliance with specified conditions (often referred to as "covenants") within 12 months after the reporting period. The IFRS IC published a provisional agenda decision describing how to apply the 2020 changes to specific fact patterns in response to questions from stakeholders. In certain cases, respondents to the tentative agenda decision expressed concern about the outcomes and possible ramifications of the 2020 revisions. The IASB decided to propose narrow-scope modifications to IAS 1 after considering the additional information. The proposed revisions would state that conditions that an entity must meet within 12 months of the reporting period have no bearing on whether a liability is classified as current or non-current. Instead, entities would present non-current obligations subject to such criteria separately and give information about them. The proposed additions would also postpone the 2020 amendments' implementation date, so that businesses are not obligated to revise their assessments of liability classification before the proposed amendments take effect.