AASB approves changes to the classification requirements for liabilities as current or non-current

In December 2022, the Australian Accounting Standards Board (AASB) approved the International Accounting Standards Board’s (IASB’s) 2022 amendments to the requirements for classifying liabilities as current or non-current. These amendments are contained in AASB 2022-06 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants. They follow amendments made by the IASB in 2020, and in some cases, supersede them. The changes could result in some liabilities being reclassified for annual periods beginning on or after 1 January 2024.

Our November 2022 Corporate Reporting Insights article, New rules for classifying liabilities from 1 January 2024, summarises the ‘final position’ after combining both the 2020 and the 2022 amendments. Please refer here for more information.

What does this mean for 31 December 2022 financial reports?

The effect on 31 December 2022 financial reports depends on whether the entity decides to early adopt these amendments.

Early adoption

As AASB 2022-06 was approved and published by the AASB prior to 31 December 2022, entities may wish to early adopt the changes. However, it may not be advantageous to do so, for example:

• If they have convertible notes with conversion features classified as derivate liabilities that will be reclassified as current liabilities
• Extra disclosure is required where the right to defer settlement is subject to the entity complying with loan covenants in the next twelve months. 

If early adopting the changes, both the 2022 and 2020 amendments must be adopted at the same time. They apply retrospectively, therefore any changes to liability classifications must be restated in the 31 December 2021 comparatives, as well as the opening balance sheet on 1 January 2021.

The effect of applying the amendments must be disclosed (as required by paragraph 28 of by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors), and the new disclosures required by AASB 2022-06 must also be provided.

No early adoption

If the entity does not wish to early adopt the amendments, the impacts of accounting standards issued not yet effective must be noted in Tier 1 general purpose financial reports. As the amendments apply retrospectively to annual periods beginning on or after 1 January 2024, 31 December 2022 financial reports should quantify the effect of the changes when the new requirements are applied to liabilities in the opening balance sheet on 1 January 2023.

More information

Please refer to our previous article and our International Financial Reporting Bulletin for more information about these amendments.

Need assistance?

Please contact our IFRS & Corporate Reporting team if you require assistance navigating these amendments to determine how they could affect the classification of your liabilities, and any flow-on effects for your loan covenants.