The International Accounting Standards Board (IASB) issued a proposal Tuesday that is intended to clarify how entities classify debt, particularly when it is coming up for renewal.
The proposal is designed to improve presentation in financial statements by clarifying the criteria for the classification of a liability as either “current” or “non-current.” The proposed amendments would accomplish this by:
- Clarifying that the classification of a liability as either “current” or “non-current” is based on the entity’s rights at the end of the reporting period, and
- Clearly describing the link between the settlement of the liability and the outflow of resources from the entity.
An initiative identified and considered by the IFRS Interpretations Committee was the source of the proposal.
— Ken Tysiac is a JofA editorial director.