23/03/2015 - EFRAG's draft comment letter on the IASB's ED/2015/1 Classification of Liabilities - Proposed amendments to IAS 1
The proposals in the ED aim at clarifying the guidance in IAS 1 Presentation of Financial Statements on classification of liabilities as current or non-current. To do so, the IASB is proposing to clarify:
- that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period; and
- the meaning of the term 'settlement' for the purposes of the classification of liabilities by adding that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
EFRAG has issued its draft comment letter on the ED where it supports the proposed amendments as they clarify the existing requirements in IAS 1 that only rights in existence as of the reporting date should be considered when determining the appropriate classification of liabilities. However, to avoid further diversity in practice, EFRAG recommends that additional guidance is provided in situations where the rights to defer settlement of a liability are subject to conditions that are assessed after the reporting period, and in situations where liabilities can settled through the issuance of shares at the option of the counterparty.
Finally, EFRAG suggests that the IASB further explores whether current guidance always provides the most relevant information when rights to defer settlement are not substantive.
EFRAG requested comments by 3 June 2015.
The draft comment letter is available here: