iscover AASB seeks to clarify debt classification
BusinessThe Australian Accounting Standards Board (AASB) has released an exposure draft designed to clear up the classification of loans and debts as current or non-current liabilities.
Exposure Draft 259 Classification of Liabilities proposes amendments to AASB 101 Presentation of Financial Statements.
Kris Peach, chair of the AASB, said the correct classification of debt is particularly important to ensure investors have a complete picture of an entity’s financial position.
“Classifying debt and other liabilities as current or non-current provides crucial information to investors about when an entity may be required to settle a liability, which in turn affects an investor’s assessment of an entity’s financial position.
“The importance of this classification will be known to those who remember Centro’s issues regarding the rollover of debt,” said Ms Peach.
“The proposals clarify that an entity must have a right to refinance or rollover a loan, or other form of debt, for at least 12 months after the reporting date in order for that loan to be classified as non-current.
“If there is no arrangement in place at the reporting date to rollover the loan, it must be classified as current,” Ms Peach said.
The AASB has called for feedback on the exposure draft, with the consultation period set to close on 9 May 2015.
