SOCPA Adopts the International Accounting Standards Board Amendment to the International Accounting

SOCPA Adopts the International Accounting Standards Board Amendment to the International Accounting Standard No. 1

SOCPA Adopts the International Accounting Standards Board Amendment to the International Accounting Standard No. 1

 

Saudi Organization for Chartered and Professional Accountants (SOCPA) represented by the Accounting Standards Council approved the amendment made by the International Accounting Standards Board to International Accounting Standard No. 1 related to the classification of liabilities arising from loan arrangements. In these arrangements, the entity has the right to defer settlement of a liability for at least 12 months after the reporting period, and is governed by the entity compliance to the terms specified in the loan arrangement. This amendment came in response to the observations given by the stakeholders of the previous amendment made by the Board related to the same subject.
The amendment is based on two aspects:
First: Restricting the conditions affecting the classification of loans as current or non-current to those that the entity must comply with the reporting date or before.
Second: Setting requirements for disclosure in the notes to enable the beneficiaries of the financial statements to understand the nature of the conditions associated with the loans. Further, to understand the risks of exposing the entity to the liability to settle the non-current liability within twelve months from the date of the report due to its breach of the terms of the loan.
SOCPA has previously commented on the standard draft, and has expressed reservations about one of the paragraphs contained in the standard draft (paragraph 72C (b)). SOCPA considered at the time that linking the non-effect of the entity actions to the occurrence of future events (or their non-occurrence) may lead to issues during application such as the entity actions in fulfilling product warranty obligations. Alternatively, the appropriate link is to make the entity actions a cause of the occurrence or non-occurrence of a future event (for example, the entity's non-compliance with a loan conditions.) As a result of SOCPA reservation and reservations of other parties on other topics mentioned in the same paragraph, the International Accounting Standards Board decided to delete the proposed paragraph, and not include it in the final version of the amendment. In addition, SOCPA suggested, in its comment, a number of disclosure topics that were not included in the standard draft, particularly information about the difficulties that the entity may face in complying with the terms of the loan, and the actions taken to avoid non-compliance. As a result, the International Board responded to SOCPA's proposal by amending the paragraph contained in the standard draft, and including a paragraph consistent with SOCPA's proposal in this regard.

You can view the amendment by clicking here .

 

 

Last Update On: 20 Feb 2023