IAS 1: Proposal for amendment in IAS 1 to improve disclosure about long term debts with covenants.

IAS 1: Presentation of Financial Statements, requires a company to classify a liability as non-current only if the company has a right to defer settlement of the liability for at least 12 months after the reporting date. However, such right is subject to the company complying with covenants after the reporting date. In case, the company fails to comply with covenants after the reporting date then this long-term debt could become repayable within 12 months.

The International Accounting Standards Board (IASB) has proposed amendments to IAS 1, to improve the disclosure about non-current liabilities with covenants and to enable investors to assess whether such liabilities could become repayable within 12 months, an amendment is proposed as under:

• • Presenting non-current liabilities that are subject to covenants, separately, in the financial statements; and
  • Disclosure of information about the covenants in the notes to its financial statements, including their nature and whether the company would have complied with them based on its circumstances at the reporting date.

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