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Accounting Standard AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current

Accounting Standard AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current

Administered by Department of the Treasury

Legislation au F2020L00283 Not in force Legislative Instrument

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Explanatory Statement

Accounting Standard AASB 2020-1
Amendments to Australian Accounting Standards –Classification of Liabilities as Current or Non-current

March 2020

EXPLANATORY STATEMENT

Standards Amended by AASB 2020-1

This Standard makes amendments to Australian Accounting Standard AASB 101 Presentation of Financial Statements (July 2015). These amendments arise from the issuance of International Financial Reporting Standard Classification of Liabilities as Current or Non-current (Amendments to IAS 1) by the International Accounting Standards Board (IASB) in January 2020.

Power to Make Amendments

Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument. Accordingly, the AASB has the power to amend the Accounting Standards that are made by the AASB as legislative instruments under the Corporations Act 2001.

Main Features of AASB 2020-1

This Standard amends AASB 101 to clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current. For example, the amendments clarify that a liability is classified as non-current if an entity has the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The meaning of settlement of a liability is also clarified.

Application Date

AASB 2020-1 is applicable to annual periods beginning on or after 1 January 2022. Earlier application is permitted.

References to Other AASB Standards

References in this Standard to the titles of other AASB Standards that are legislative instruments are to be construed as references to those other Standards as originally made and as amended from time to time and incorporate provisions of those Standards as in force from time to time.

Consultation Prior to Issuing this Standard

The AASB issued Exposure Draft ED 259 Classification of Liabilities in February 2015 for comment by 9 May 2015. ED 259 incorporated IASB Exposure Draft ED/2015/1 Classification of Liabilities. The AASB received six formal submissions in respect of the proposals in ED 259, which expressed general support for the proposed amendments while also raising some minor concerns. The AASB also obtained informal feedback via targeted outreach with stakeholders, including accounting firms and professional bodies. The AASB made a submission to the IASB on ED/2015/1, generally agreeing with the proposals and raising some of the minor concerns noted by respondents to ED 259. Six Australian stakeholders made submissions directly to the IASB on ED/2015/1, also broadly supporting the IASB’s proposed amendments.

The IASB analysed the feedback it received on the proposed amendments and decided to finalise the amendments, partially addressing the minor concerns raised by the AASB and Australian stakeholders. The IASB set an effective date of annual periods beginning on or after 1 January 2022, with earlier application permitted. The AASB considered the amendments made by the IASB to IAS 1 Presentation of Financial Statements in finalising AASB 2020-1 and the amendments to AASB 101.

A Regulation Impact Statement (RIS) has not been prepared in connection with the issue of AASB 2020-1 as the amendments made do not have a substantial direct or indirect impact on business or competition.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011

Accounting Standard AASB 2020-1
Amendments to Australian Accounting Standards –
Classification of Liabilities as Current or Non-current

Overview of the Accounting Standard

This Standard makes amendments to Australian Accounting Standard AASB 101 Presentation of Financial Statements (July 2015).

Human Rights Implications

This Standard is issued by the AASB in furtherance of the objective of facilitating the Australian economy. It does not diminish or limit any of the applicable human rights or freedoms, and thus does not raise any human rights issues.

Conclusion

This Standard is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

Accounting Standard AASB 2020-1, enacted in 2020, amends Australian Accounting Standard AASB 101 Presentation of Financial Statements (July 2015). This amendment responds to the need for clarity in the classification of liabilities as current or non-current, a problem identified through consultation with stakeholders and feedback on earlier drafts. The Australian Accounting Standards Board (AASB) issued Exposure Draft ED 259 Classification of Liabilities in February 2015, receiving general support for the proposed amendments while addressing some minor concerns. The AASB finalised these amendments in alignment with the International Accounting Standards Board's (IASB) changes to International Financial Reporting Standard Classification of Liabilities as Current or Non-current (Amendments to IAS 1), setting an application date for annual periods beginning on or after 1 January 2022, with earlier application permitted. The amendments aim to ensure financial statements provide clearer and more consistent information on liabilities, thereby facilitating better financial analysis and decision-making by users of these statements.

Scope and Application

The AASB 2020-1, which amends Australian Accounting Standard AASB 101 Presentation of Financial Statements, applies to entities required to prepare financial statements in accordance with Australian Accounting Standards. This includes entities listed on the Australian Securities Exchange, other public interest entities, and private entities that elect to apply the Australian Accounting Standards. The amendments clarify the presentation of liabilities in the statement of financial position as current or non-current, providing guidance on when a liability should be classified as non-current, particularly when an entity has the right to defer settlement for at least 12 months after the reporting period. The amendments are applicable to annual periods beginning on or after 1 January 2022, with earlier application permitted. While the Act itself does not specify exclusions or exemptions, it should be noted that the application of these standards is contingent on the specific circumstances and financial operations of each entity. The AASB has the authority to further refine and clarify these standards through subordinate instruments if necessary.

Key Provisions

The key operative sections of AASB 2020-1, which amends AASB 101 Presentation of Financial Statements, are found in section 1, where it specifies the amendments made to clarify the classification of liabilities as either current or non-current. For example, section 1(2) states that a liability is classified as non-current if an entity has the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. This amendment provides greater clarity on the criteria for classifying liabilities, ensuring consistency in financial reporting. Additionally, section 1(3) clarifies the meaning of settlement of a liability, providing a more precise definition that aids in the accurate presentation of financial statements. The obligations imposed by AASB 2020-1 on entities governed by AASB 101 include ensuring that they classify their liabilities correctly as current or non-current based on the criteria outlined in the amendments. Entities must review their financial statements and ensure that any liabilities that can be deferred for at least 12 months after the reporting period are classified as non-current. This includes reassessing existing liabilities and ensuring that any new liabilities are classified according to the new criteria. The Standard also requires entities to provide clear and transparent disclosures in their financial statements regarding the classification of liabilities, as mandated by section 1(4) of the Standard. There are no specific offences or penalties outlined in AASB 2020-1 itself, as it is an accounting standard rather than a regulatory instrument that imposes sanctions. However, entities that fail to comply with the classification requirements may face civil consequences, such as challenges to the accuracy of their financial statements by stakeholders, investors, or regulatory bodies. In severe cases, misclassification of liabilities could lead to financial misrepresentation, which may result in legal action against the entity or its directors. Additionally, non-compliance with accounting standards can lead to reputational damage and loss of investor confidence, indirectly impacting the entity's operations and financial performance.

Area of Law: Commercial Law
Instrument: Regulation
Concepts: Definitions & Interpretation; Commencement Provisions; Reporting & Disclosure Obligations

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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