Current Liabilities and Contingencies

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Current Liabilities and Contingencies

Current Liabilities

IAS 1, Presentation of Financial Statements, requires liabilities to be classified as current or noncurrent. Current liabilities are those liabilities that a company: a. expects to settle in its normal operating cycle, b. holds primarily for the purpose of trading, c. expects to settle within twelve months of the balance sheet date, or d. does not have the right to defer until twelve months after the balance sheet date.

The classification and accounting for current liabilities under IFRS is very similar to U.S. GAAP. Differences relate to the following:

* Refinanced short-term debt – may be reclassified as long-term debt only if refinancing is completed prior to the balance sheet date (under U.S. GAAP, a refinancing agreement must be reached but the refinancing need not be completed by the balance sheet date) * Amounts payable on demand due to violation of debt covenants – must be classified as current unless a 12-month waiver is obtained from the lender by the balance sheet date (waiver must be obtained by the annual report issuance date under U.S. GAAP) * Bank overdrafts – are netted against cash if the overdrafts form an integral part of the entity’s cash management (classified as current liabilities under U.S. GAAP). * Deferred income taxes – deferred income tax assets and deferred income tax liabilities are not allowed to be classified as current (under U.S. GAAP, deferred taxes are classified as current or noncurrent based on the underlying asset or liability giving rise to the deferred tax)

Provisions, Contingent Liabilities, and Contingent Assets

IAS 37, Provisions, Contingent Liabilities and Contingent Assets, distinguishes between “provisions” and “contingent liabilities.”


A provision is a present obligation of uncertain timing or…...

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