The proposed amendments to IAS 1, replacing the word ‘Discretion’ with ‘Right’

The International Accounting Standards Board (IASB) has published on 10 February 2015 the Exposure Draft of proposed amendments to IAS 1 Presentation of Financial Statements to clarify the criteria for the classification of a LIABILITY as either CURRENT or NON-CURRENT.

The proposals clarify that classification of liabilities as either current or non-current is based on the RIGHTS that are existence at the END OF THE REPORTING PERIOD. In order to make this clear, the IASB proposes :

1. replacing ‘DISCRETION’ in paragraph 73 of the Standard with ‘RIGHT’ to align it with the requirements of paragraph 69(d) of the Standard;
2. making it explicit in paragraph 69(d) and 73 of the Standard that only rights in place AT THE REPORTING DATE should affect the classification of a liability; and
3. deleting ‘UNCONDITIONAL’ from paragraph 69(d) of the Standard so that ‘an unconditional right’ is replaced by ‘a right’

The IASB also proposes making clear the link between the settlement of the liability and the outflow of resources from the entity by adding that settlement ‘refers to the transfer to the counterparty of cash, equity instruments, other assets or services’ to paragraph 69 of the Standard.

The IASB further proposes that guidance in the Standard should be reorganised so that similar examples are grouped together.

Finally, the IASB proposes that retrospective application should be required and that early application should be permitted.

Comments on the proposals in this Exposure Draft (to be received by 10 June 2015) should be submitted using one of the following methods :

• Electronically, by visiting the ‘Comment on a proposal’ page, which can be found at : go.ifrs.org/comment
• Email, by sending to : commentletters@ifrs.org
• Postal, by addressing to : IFRS Foundation, 30 Cannon Street, London EC4M 6XH, United Kingdom

Please click this link to access the Exposure Draft