In a joint submission, CPA Australia and CA ANZ have supported the IASB’s proposal to further clarify the requirements for the classification of current and non-current liabilities contained in paragraphs 69-76 of IAS 1 Presentation of Financial Statements. The clarifications particularly relate to the assessment and classification of loans with conditions, addressing concerns raised by stakeholders worldwide as they began implementing amendments to these paragraphs issued by the IASB in 2020.

In particular, the submission supports the Board’s proposals to ensure that only conditions existing at or before the reporting date are a factor in assessing classification as current or non-current at the reporting date. Where such conditions are imposed after balance date, we agree that they should not impact classification at the reporting date, but that the nature of these conditions and the entity’s assessment of their likely impact should be required to be separately disclosed. 

We also support the Board’s proposals:

• To require retrospective application of these clarifications, and the deferral of the 2020 amendments to IAS 1 until such time as the amendments resulting from these proposals are operative.  
• For additional disclosure to be the mechanism for addressing the information needs of users on the impact of future loan conditions.

However, we do not support:

• The Board’s specific proposals to require liabilities subject to post balance date conditions to be separately presented on the face of the balance sheet.
• The nature and extent of the proposed disclosures concerning these conditions. 

Rather than prescribing these disclosures in detail we believe it would be more beneficial to develop a more general principles-based disclosure requirement that identifies the types of information users find relevant. This would give preparers the guidance they need to provide meaningful disclosure and the flexibility that is necessary to accommodate the variety of entities and loan conditions that will be subject to these requirements. It would also guide auditors assessing the adequacy of these disclosures.