Publishes amendments to IAS 1 - Non-current Liabilities with Restrictive Covenants

BDO has published IFRB 2022/07. The IASB has issued amendments to IAS 1 - Non-current liabilities wi

BDO has published IFRB 2022/07. The IASB has issued amendments to IAS 1 - Non-current liabilities wi


On November 14, 2022, a significant milestone was reached in the field of accounting and financial reporting with the publication by the International Accounting Standards Board (IASB) of amendments to IAS 1 regarding non-current liabilities with covenants. BDO, through its IFRB 2022/07 bulletin, sheds light on these changes, which promise to significantly impact the presentation of debt and financial indicators in the financial statements of companies. This article details the key aspects of these amendments and their influence on the classification of liabilities.

Clarification Provided by the IASB to IAS 1 The recent amendments to IAS 1 aim to clarify how companies should determine the classification of liabilities with covenants as current or non-current. This distinction is crucial as it directly affects the assessment of a company's financial health by investors, creditors, and other stakeholders.

Main Amendments Introduced The changes introduced specify the conditions under which liabilities can be considered as non-current, even in the presence of covenants, and include :
  • Classification Criteria: More precise definition of the conditions required to classify a liability with covenants as non-current.
  • Financial Implications: Discussion on how these criteria affect reported debt, liquidity, and key financial ratios.
  • Illustrative Examples: Provision of concrete examples to help companies correctly apply the new guidelines.
Impact of the Amendments on Companies These amendments have a notable impact on how companies present their liabilities in financial statements.

The clarification provides companies with a more solid basis for decision-making regarding the classification of their liabilities and, consequently, on how their financial situation is perceived externally.

  • Better Transparency: Companies can offer a truer picture of their debt structure and financial health.
  • Compliance Considerations: Entities need to review their accounting processes and policies to ensure they are in compliance with the new guidelines.