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IASB proposes narrow-scope amendments to IAS 1

On November 19, the IASB issued an exposure draft of proposed amendments to IAS 1, Presentation of Financial Statements, intended to improve the information companies provide about long-term debt with covenants.IAS 1 requires a company to classify a liability as non-current only if the company has a right to defer settlement of the liability for at least 12 months after the reporting date. The proposed amendments would specify that failure to comply with covenants after the reporting date would not affect the classification of a liability at the reporting date. A company would need to present non-current liabilities subject to covenants on the statement of financial position separately from other non-current liabilities and disclose the nature of the covenants, including whether the company would have complied with them based on its circumstances at the reporting date.The proposals would also defer the effective date of other amendments to IAS 1 regarding the classification of liabilities as current or non-current issued in January 2020. Originally effective for annual reporting periods beginning on or after January 1, 2023, the effective date would be deferred to align with the newly-proposed amendments in the exposure draft.Comments on the exposure draft are due by March 21, 2022.

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