Non-current Liabilities with Covenants
The amendments to NZ IAS 1 clarify how covenants with which an entity must comply within twelve months after the reporting period affect the classification of a liability, addressing concerns from stakeholders.
The amendments also improve the information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with covenants.
Commencement and Application
Except for paragraphs NZ 139U.1 – NZ 139U.2 and the amendments to paragraph 139U, application of the amendments is required for accounting periods beginning on or after 1 January 2024. Application is permitted for accounting periods that begin before 1 January 2024 but have not ended or do not end before 22 June 2023.
Application of paragraphs NZ 139U.1 – NZ 139U.2 and the amendments to paragraph 139U (which concern the commencement and application of the amending standard Classification of Liabilities as Current or Non-current) is required from 22 June 2023 onwards.
What do the amendments require:
- Only covenants with which an entity must comply on or before the reporting date affect the classification of a liability as current or non-current.
- Entities must disclose information to enable users to understand the risk that non-current liabilities with covenants could become repayable within twelve months.
- The application date of the amendments introduced by Classification of Liabilities as Current or Non-current has been deferred to 1 January 2024.