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Ind AS January 2023

The Exposure Draft (“ED”) of the Amendments to Ind AS 1, Presentation of Financial Statements, issued by the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India on 30 December 2022, proposes amendments relating to the classification of liabilities as current or non-current for breach and subsequent cure of financial and non-financial covenants. It aims to eliminate the carve-out provided by Ind AS 1 to align with the classification of liabilities as current or non-current with the principles set out under Ind AS 1, Presentation of Financial Statements. It also clarifies classifying certain convertible debt as part of the financial statements.

The changes listed in the ED propose amendments relating to the classification of liabilities as current or non-current, which will eliminate the difference between Ind AS 1 and IAS 1 and will also resolve the contradictions between paragraph 69(d) of Ind AS 1, which specifies that the entity should have an unconditional right to defer settlement of liability at least 12 months after the reporting date and paragraph 73 of Ind AS 1 which provides that the entity should have an expectation of rolling over its loan facility for at least 12 months after the reporting date.

We are of the view that the carve-out should not be removed and support disclosure of the condonation by a lender before the management approves the financial statements. We believe that this disclosure of information in the financial statements will enable the users to assess the risk of instances when that liability could become repayable within twelve months. This approach will likely result in the availability of relevant information to the user of the financial statements.

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