IFRS amendments in force starting from 2024

In 2024, the IASB (International Sustainability Standards Board) confirmed amendments to four existing standards:

• IAS 1 – Presentation of Financial Statements
• IFRS 16 – Leases
• IAS 7 - Statement of Cash Flows and
• IFRS 7 - Financial Instruments: Disclosures 

IAS 1 – Presentation of Financial Statements

Amendments that entered into force to the IAS 1 Presentation of Financial Statements standard from January 1, 2024 and are applicable retrospectively, give additional emphasis to the classification of liabilities in annual reports - the division into short-term and long-term parts.

According to the current standard version, if the company has no unconditional right to postpone the payment obligation for at least 12 months after the reporting date, obligations are classified as Short-term.

The International Accounting Standards Board (IASB) has cancelled the requirement that the right to defer payment to be unconditional. A company classifies a liability as non-current if it has the right to defer payment for at least 12 months after the reporting date under contractual conditions. This right can be granted to a company that meets the covenants of the loan agreement.

Only those covenants, that are valid and fulfilled on or before the reporting date should be taken into account. Conditions or covenants that must be met after the reporting date do not affect the classification of liabilities at the balance sheet date.

Example:

The company has a loan from a credit institution for three years. There are the following conditions: EBITDA must be above 5. If EBITDA is above 5 on the balance sheet date, then the company has the right to reflect the loan as Long-term. On the other hand, if the EBITDA on the balance sheet date is below 5, then the loan can be classified as short-term.

It is important to add that if the balance sheet date of the company's annual report is 31/12/2024 and EBIDTA is fulfilled on this date, but it is not fulfilled already on 15/01/2025, this will not affect the classification of liabilities in the annual report. Liabilities will be reflected as Long-term in accordance with the fulfillment of the condition on the balance sheet date - 31/12/2024.

An additional clarification is provided for the situation if the company wants to pay (or already actually paid) the entire amount of the loan after the balance sheet date. This fact cannot affect the classification of liabilities on the balance sheet date. This fact can be mentioned in Events after the balance sheet date, while the entire value of borrowings should be reflected according to the above mentioned-principle.

IFRS 16 – Leases

The amendments entered into force on January 1, 2024. Only transactions in which an asset was sold with a leaseback are subject to redaction.

The new version amends the calculation of how a seller-lessee evaluates the lease liability arising from a leaseback after the transaction. There will now be an obligation to include the variable lease payments arising in sale and leaseback transactions.

Until now, only those variable lease payments tied to inflation or some other coefficient were added to the calculation of the total amount of lease obligations. On the other hand, if now the transaction meets the definition: sale with leaseback, then a different calculation approach will be applied.

IAS 7 - Statement of Cash Flows and IFRS 7 - Financial Instruments: Disclosures

Starting from January 1, 2024, IAS 7 and IFRS 7 standards have been amended. The amendment aims to increase the transparency of financial statements so that users can assess how Supplier finance arrangements affect the company's liabilities, cash flows and liquidity risk. To achieve these goals, the amendment requires the company to disclose new information about the supplier finance arrangements.

New requirements for information disclosure:

1. The carrying amounts of financial liabilities that are part of supplier financing arrangements and the items in which these liabilities are presented.
2. Accounting value of financial liabilities for which suppliers have already received payment;
3. The range of payment terms for both financial liabilities that are part of these arrangements and comparable payables that are not part of such arrangements (the financing party is not involved);
4. Fund availability and liquidity risk analysis at financial service providers.

Reliefs:

• Disclosure of comparative information is not required in the first year (i.e. a company whose balance sheet date is 31 December, 2024 does not have to provide comparative information for the year 2023).

To prepare for the amendments to the standards, it is worth considering in time to what extent they may affect the process of preparing the annual report. If you have any doubts, questions or need help in preparing the annual report according to IFRS, contact us at info@orients.lv.

Read also: 

IFRS 18 will be the first standard developed in cooperation with the digital team

Why is the digital Inline XBRL format essential for structuring the IFRS annual and sustainability reports?