Non-current Liabilities with Covenants

The amendments to NZ IAS 1 clarify how covenants with which an entity must comply within twelve months after the reporting period affect the classification of a liability, addressing concerns from stakeholders.

The amendments also improve the information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with covenants.

Commencement and Application

Except for paragraphs NZ 139U.1 – NZ 139U.2 and the amendments to paragraph 139U, application of the amendments is required for accounting periods beginning on or after 1 January 2024. Application is permitted for accounting periods that begin before 1 January 2024 but have not ended or do not end before 22 June 2023.

Application of paragraphs NZ 139U.1 – NZ 139U.2 and the amendments to paragraph 139U (which concern the commencement and application of the amending standard Classification of Liabilities as Current or Non-current) is required from 22 June 2023 onwards.

  • Non-current Liabilities with Covenants

    Date of issue: May 2023

*Additional Material is restricted to those with NZ-assigned IP addresses only.

What do the amendments require:

  • Only covenants with which an entity must comply on or before the reporting date affect the classification of a liability as current or non-current.
  • Entities must disclose information to enable users to understand the risk that non-current liabilities with covenants could become repayable within twelve months.
  • The application date of the amendments introduced by Classification of Liabilities as Current or Non-current has been deferred to 1 January 2024.