SOCPA Shares Its Comments on IASB's Exposure Draft Regarding Amendments to IAS 1
The International Accounting Standards Board (IASB) has published an exposure draft for new amendments to IAS 1 to improve the classification requirements for non-current liabilities with no disclosure conditions.
The Saudi Organization for Chartered and Professional Accountants (SOCPA), has shared its comments on the exposure draft and it agrees with the Board that the conditions that affect the liability classification of an entity are the ones in which an entity must comply with on or before the reporting date.
SOCPA also suggested that in instances an entity believes it will not be able to comply with conditions after the end of the reporting period, a disclosure should be made of information relating to any action taken by the entity to address the possible inability to comply with the conditions in the future. SOCPA also shared its concern on the auditability of the suggested disclosures proposed in IASB's amendments, since the disclosure required by the amendments pertaining to how entities can comply with liabilities' conditions after the reporting period will be totally based on management’s judgment.
With regard to the classification of uncertain future liabilities, such as product warranty liabilities, and where the amendment indicated that the reason for classifying them as current liabilities is because their occurrence or non-existence is not affected by the future actions of the management, therefor SOCPA believes that it is better to amend the reason to the fact that its occurrence or non-existence is not triggered by management’s future actions, whether such actions have an impact on the event or not.
SOCPA also agrees, with the Board’s proposal to present separately, in the statement of financial position, liabilities classified as non-current even if an entity presents its liabilities in order of liquidity. Such classification, SOCPA believes, is complementary to the disclosure requirements in paragraph No. 61 (b) of the standard and provides important information to the users of financial statments.