Thursday, December 2, 2021
AASB 101 requires an entity to classify a liability as non-current only if the entity has a right to defer settlement of the liability for at least 12 months after the reporting date. However, such a right is often subject to the entity complying with covenants after the reporting date. For example, an entity might have long-term debt that could become repayable within 12 months if the entity fails to comply with covenants after the reporting date.
The proposed amendments specify that, in such a situation, covenants would not affect the classification of a liability as current or non-current at the reporting date. Instead, an entity would:
These proposals would improve the information an entity provides about non-current liabilities with covenants by enabling users of general purpose financial statements to assess whether such liabilities could become repayable within 12 months.