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UKEB seeks views on two major proposals

Author: ICAEW Insights

Published: 22 Feb 2022

The UK Endorsement Board is seeking input on two proposals changing disclosure requirements on Supplier Finance Arrangements and non-current liabilities with covenants.

The UK Endorsement Board (UKEB) is seeking ICAEW members’ inputs on two International Accounting Standards Board (IASB) proposals it is seeking to influence.

The IASB has proposed changes to disclosure requirements on Supplier Finance Arrangements, under IFRS Standards. It has also published the Exposure Draft: Non-current Liabilities with Covenants (Proposed Amendments to IAS 1).

ICAEW members’ inputs will help to inform the UKEB’s response letters to IASB.

Supplier Finance Arrangements

The IASB is proposing amendments to IFRS Standards requiring entities to disclose additional information to enable users of financial statements to understand the effects of these arrangements on an entity’s liabilities and cash flows, liquidity risk and risk management.

The UKEB has expressed that it is broadly in favour of the IASB’s proposals. However, they believe the proposals could be enhanced to be more valuable for users of accounts. In its draft response letter, it provides some recommendations, in particular regarding cash flow disclosures and the prominence given to certain risk disclosures.

The UKEB invites UK stakeholders to provide feedback on the UKEB’s draft comment letter and their comment period ends on 4 March. Your input is valuable and will inform the development of financial reporting.

Further details on this project and how to respond to the invitation to comment on the UKEB’s draft comment letter can be found here.

Non-current liabilities with covenants

The IASB’s Exposure Draft aims to address the presentation (as current or non-current) and disclosures relating to liabilities of an entity, when its right to defer settlement of that liability is subject to compliance with conditions (eg, covenants).

It specifies that the conditions to which an entity must comply within 12 months after the reporting period, do not affect classification of a liability as current or non-current. Instead, entities would present separately on the face of the statement of financial position, and disclose information about non-current liabilities subject to such conditions.

The UKEB has published a draft comment letter in which it agrees with the IASB’s proposed amendments that remove the requirement to classify debt as a current liability where the entity is in technical breach of covenants for which compliance is to be tested at a future date.

It supports the proposals for enhancing disclosure about non-current liabilities in the notes to the financial statements.

However, it does not support the specific requirement for separate presentation in the statement of financial position of non-current liabilities subject to conditions that an entity must comply with within 12 months after the reporting period.

It believes that the additional guidance for determining whether a liability is current or non-current risks introducing unintended consequences as there appears to be diversity in how the requirements are being interpreted. 

If you would like to provide feedback to be incorporated into the UKEB’s final comment letter to the IASB, complete the ‘Invitation to Comment’ template, which can be found on the UKEB website. The deadline for stakeholder comments to the UKEB is 7 March 2022.

If you have any questions, please contact the UKEB