IAS 1 —Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
👀What is this amendment about?🤷♂️
🔋It is more sought of clarification about the classification of liabilities as current or non-current. It affects only the presentation of liabilities in the statement of financial position.
👀Does it impact amount or timing of recognition of any asset, liability, income or expense?🤞
🔋No it doesn't
👀Amendment is effective from?
🔋1 January 2022 and is to be applied retrospectively. Earlier application is permitted.
🎶Amendment is?
🎈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
🎈Clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability
🎈Make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services
Please note this amendment is only an additional clarification to the existing IAS 1 , prima facie, there is no fundamental changes to the IAS 1.
Summary:
The amendment is only an clarification to classify the liability as current or non-current. The only parameter to use for the classification of liability as current/non-current as per amendment to IAS 1 is right existing at the end of the reporting period. There is no place for confusion as the amendment has replaced the words like expectations which required management to exercise its evaluation of the outcome/event/condition. Hence, a more concrete approach has been clarified now through this amendment. In fact a definition of what does settlement means has also been notified. Settlement refers to the counterparty of cash, equity instruments , other asset or services.
Thank you!👏
PS. : Refer below IAS too,
1. Quick Introduction to IFRS Foundation — https://nilutjain.medium.com/ifrs-foundation-ifrs-116dde0dd9d6
2. IAS 1 — Presentation of Financial Statements
https://nilutjain.medium.com/ias-1-presentation-of-financial-statements-dfe8ff7a8e25
3. IAS 2 — Inventories
https://nilutjain.medium.com/ias-2-inventories-b4df71b0becb
