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ISCA Comments on IASB’s ED on Non-current Liabilities with Covenants (Proposed Amendments to IAS 1)

We are appreciative of the Board’s efforts to address stakeholders’ concerns arising from the classification requirements introduced by the amendments made to IAS 1 in January 2020 titled Classification of Liabilities as Current or Non-current which will be effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted.

We generally agree with the Board’s proposal that if an entity’s right to defer settlement of a liability is subject to the entity complying with specified conditions within twelve months after the reporting period, those conditions should have no effect on whether the entity has a right to defer settlement of the liability for at least twelve months after the reporting period. This would be applicable to liabilities with conditions which the entity must comply only after the reporting date.

Whilst we agree with the non-current classification of these liabilities, we have concerns on the requirement to provide additional disclosures which are intended to enhance users’ understanding of the liabilities and their related covenants.

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