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The International Accounting Standards Board (IASB) has today issued amendments to IAS 1 Presentation of Financial Statements that aim to improve the information companies provide about long-term debt with covenants.

IAS 1 requires a company to classify debt as non-current only if the company can avoid settling the debt in the 12 months after the reporting date. However, a company’s ability to do so is often subject to complying with covenants. For example, a company might have long-term debt that could become repayable within 12 months if the company fails to comply with covenants in that 12-month period.

The amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require a company to disclose information about these covenants in the notes to the financial statements.

The IASB expects the amendments to improve the information a company provides about long-term debt with covenants by enabling investors to understand the risk that such debt could become repayable early.

The amendments also respond to stakeholders’ feedback on the classification of debt as current or non-current when applying requirements introduced in 2020 that are not yet in effect.

The amendments are effective for annual reporting periods beginning on or after 1 January 2024, with early adoption permitted.

IFRS Digital Subscribers and IFRS Digital and Print subscribers can download the document from the Standards Navigator and the Non-current Liabilities with Covenants project page. IFRS Digital and Print subscribers will be sent a printed copy of the document, and printed copies will also be available to order from the IFRS shop.

Followable tags

IFRS Accounting Standards development
IFRS Accounting Standards, Amendments and Interpretations
IFRS Practice Statement 2 Making Materiality Judgements
IAS 1 Presentation of Financial Statements