New Requirements Effective For 31 December 2024

New accounting standards

We are pleased to report that we have another reporting season without any major new accounting standards for you to implement.

There are four new standards to be considered, depending on the nature of your transactions and balances, and in particular the amending standard relating to current / non-current classification of liabilities may cause some changes to presentation in your balance sheet.

Amendments to AASB 101 relating to current / non-current classification of liabilities

The clarifications confirm that the presentation of liabilities as current or non-current depends on rights in existence at the reporting date. A liability is classified as non-current if an entity has the right to defer settlement for at least 12 months from the reporting date.

In relation to banking covenants, an entity needs to consider the timing of covenants, testing:

• If the covenant is tested on or before the reporting date, then an entity needs to determine whether the metrics have been met:
  • If yes, then normal current / non-current presentation principles are used, however
  • If no, then generally the liability is classified as current

• If the covenant is tested after the reporting date, then an entity doesn’t consider compliance with the metrics for the purpose of classification, however, disclosures about the nature of the covenants and any circumstances which may indicate difficulty in complying are now required.

AASB 101 also now includes specific guidance around waivers or periods of grace which may be received from the financial institution in the event of a breach of covenant.

This standard may result in changes to the classification of liabilities in an entity’s balance sheet and in many cases will mean additional disclosures around covenants are included in the notes to the financial statements. While these changes will not result in changes to recognition and measurement, they provide important information to users around solvency and liquidity and therefore should be reviewed by all entities.

Other standards

The following standards are also applicable for the first time at 31 December 2024.

• AASB 2022-5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback – this amendment requires a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that does not recognise any amount of the gain or loss related to the right of use it retains. Remember that entities should ensure that control of an asset needs to be lost to meet the definition of a sale under AASB 15 Revenue from Contracts with Customers regardless of the legal form of any agreement and therefore entities should confirm that this is the case prior to accounting for a transaction as a sale and lease back
• AASB 2023-1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements (AASB 2024-1 is Tier 2 version) – this amendment requires disclosures by entities in relation to any supplier finance arrangements
• AASB 2022-10 Amendments to Australian Accounting – Fair Value Measurement of Non-Financial Assets of Not-For-Profit Public Sector Entities – this amendment to AASB 13 is applicable only for not-for-profit public sector entities and provides clarity in relation to the measurement of fair value for those assets which do not generate independent cash flows. Previous information provided is available here

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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.