An asset is a current asset if:

1. the entity expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
2. it is held primarily for trading;
3. the entity expects to realize the asset within 12 months after the reporting period; or
4. it is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are non-current.

Consideration of an entity’s operating cycle – current assets

Current assets include assets (e.g., inventories and trade receivables) that are sold, consumed, or realized as part of the normal operating cycle even when they are not expected to be realized within 12 months after the reporting period. When an entity’s normal operating cycle is not identifiable, it is assumed to be 12 months.

Current assets also include assets primarily held for trading (examples include some financial assets that meet the definition of held for trading in IFRS 9 or, for entities that have not yet adopted IFRS 9, IAS 39) and the current portion of non-current financial assets.

Current assets include some, but not necessarily all, financial assets classified as held for trading by IFRS 9 (or, for entities that have not yet adopted IFRS 9, IAS 39).

Entity holds assets related to different operating cycles

Current/non-current: The entity holds assets related to different operating cycles

The IFRIC (now the IFRS Interpretations Committee) was asked to consider whether the ‘normal operating cycle‘ criterion in IAS 1 applies only if an entity has a predominant operating cycle. This is particularly relevant to the inventories of conglomerates which, on a narrow reading of the wording, might always have to refer to the 12-month criterion, rather than the operating-cycle criterion.

As reported in the June 2005 IFRIC Update, the Committee decided not to consider the question further because, in its view, it was clear that the wording should be read in both the singular and the plural and that it is the nature of the asset about the operating cycle that is relevant for classification.

Furthermore, if an entity holds assets (e.g., inventories) related to different operating cycles, and it is material to readers’ understanding of an entity’s financial position, further information should be disclosed under the general requirements of IAS 1.

Assets classified as non-current

All assets other than those that meet the definition of a current asset are classified as non-current.

IAS 1 uses the term ‘non-current‘ to include tangible, intangible, and financial assets of a long-term nature. It does not prohibit the use of alternative descriptions provided that the meaning is clear.

Classification of liabilities as current or non-current – January 2020 amendments to IAS 1

In January 2020, the Board issued a Classification of liabilities as current or non-current (Amendments to IAS 1). The amendments:

• clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period;
• specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability;
• explain that rights are in existence if covenants are complied with at the end of the reporting period; and
• introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.

The amendments are effective for annual periods beginning on or after 1 January 2023 with early application permitted.

Current liability – definition (entities that have adopted the January 2020 amendments)

A liability is classified as a current liability when it satisfies any of the following criteria: [IAS 1:69]

• it is expected to be settled in the entity’s normal operating cycle;
• it is held primarily for trading;
• it is due to be settled within 12 months after the reporting period; or
• the entity does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period.

In respect of IAS 1, the settlement means a transfer of:

• cash or other economic resources (e.g., goods or services); or
• the entity’s equity instruments to the counterparty which results in extinguishing the liability.

However, the transfer of an entity’s equity instruments as a result of an option of the counterparty to settle a liability does not affect the classification as current or non-current if the entity has classified the option as an equity instrument under IAS 32 and has thus recognized it separately from the liability as an equity component of a compound financial instrument.

Consideration of an entity’s operating cycle (entities that have adopted the January 2020 amendments)

Some current liabilities, such as trade payables and some accruals for employees and other operating costs, are part of the working capital used in the entity’s normal operating cycle. Such items are classified as current liabilities even if they are due to be settled more than 12 months after the reporting period.

The same normal operating cycle applies to the classification of an entity’s assets and liabilities. When the normal operating cycle is not identifiable, its duration is assumed to be 12 months.

Current/non-current: classification of an overdraft facility with a ‘lock-box’ arrangement – example (entities that have adopted the January 2020 amendments)

Company A has a five-year CU50 million overdraft facility with Bank B that includes a ‘lock-box‘ account arrangement. Under the terms of the lock-box arrangement, Company A’s customers are required to remit payments directly to a designated lock-box account, and the amounts received are applied to reduce the debt outstanding under the overdraft facility.

At the end of each day, because Company A may request additional borrowings under the facility (Company A is permitted to withdraw an amount equal to the daily cash receipts), the outstanding balance due under the facility could remain unchanged.

Company A uses the overdraft facility as a source of long-term financing and has maintained a minimum balance of CU20 million. Neither Company A nor Bank B expects the balance to be below CU20 million in the next 12 months. Total cash receipts exceed the overdraft facility in any given year.

Company A’s overdraft should be presented as a current liability. IAS 1 requires an entity to classify a liability as current if it expects to settle the liability in its normal operating cycle.

Because the customer remittances represent the current working capital of Company A that is being used to settle its obligation, the obligation is considered a short-term obligation of the borrower.

In many situations, entities maintain a minimum balance payable to a trading partner. Similar to accounting for trade payables, the balance is classified based on the terms of the underlying arrangements or invoices payable – consequently, they are generally classified as current liabilities.

Held for trading or due to be settled within 12 months (entities that have adopted the January 2020 amendments)

Other current liabilities are not settled as part of the normal operating cycle but are due for settlement within 12 months after the reporting period or held primarily for trading (examples include some financial liabilities classified as held for trading by IFRS 9 (or, for entities that have not yet adopted IFRS 9, IAS 39), bank overdrafts, the current portion of non-current financial liabilities, dividends payable, income taxes and other non-trade payables).

Financial liabilities that provide financing on a long-term basis (i.e., not working capital used in the normal operating cycle) and that are not due for settlement within 12 months after the reporting period are non-current liabilities. This is subject to an exception when the entity breaches an undertaking under a long-term loan arrangement.

Current liabilities include some, but not necessarily all, financial liabilities classified as held for trading by IFRS 9 (or, for entities that have not yet adopted IFRS 9, IAS 39).

Refinancing agreed after the reporting period (entities that have adopted the January 2020 amendments)

Financial liabilities are classified as current when they are due to be settled within 12 months after the reporting period even if: [IAS 1:72]

• the original term was for a period longer than 12 months; and
• an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue.

Current/non-current: refinancing of liability after the reporting period (entities that have adopted the January 2020 amendments)

A refinancing after the reporting period should not be taken into account in assessing whether a liability should be classified as current or non-current.

As explained in IAS 1, the Board concluded that the reporting of an entity’s liquidity and solvency at the end of a reporting period should reflect contractual arrangements in force on that date.

A refinancing after the reporting period is a non-adjusting event by IAS 10 and should not affect the presentation of the entity’s statement of financial position.

Entity has the right to defer settlement for at least 12 months (entities that have adopted the January 2020 amendments)

If an entity has the right, at the end of the reporting period, to roll over an obligation for at least 12 months after the reporting period under an existing loan facility, it classifies the obligation as non-current.

This is so even if it would otherwise be due within a shorter period. If no such right exists, the potential to refinance is not considered and the obligation is therefore classified as current.

The right to defer settlement of liability in IAS 1 must both have substance and exist at the end of the reporting period. If such a right is subject to the entity complying with specified conditions, the right only exists at the end of the reporting period if the entity complies with those conditions at the end of the reporting period even if the lender does not test compliance until a later date.

The entity expects to settle liability not due to be settled within 12 months after the reporting period (entities that have adopted the January 2020 amendments).

If a liability meets the criteria in IAS 1:69 for classification as non-current, it should be classified as non-current even if management intends or expects the entity to settle the liability within 12 months after the reporting period.

Similarly, such liability should be classified as non-current even if the entity settles the liability between the end of the reporting and the date the financial statements are authorized for issue.

In both of these circumstances, the entity may need to disclose information about the timing of settlement to enable an understanding of the impact of the liability on the financial position of the entity.

Current/non-current: classification of a loan not due to be settled within 12 months after the reporting period but expected to be repaid before the due date – example (entities that have adopted the January 2020 amendments)

On 1 January 20X1, Entity X borrows funds from a third-party bank for long-term financing purposes. The loan is due for repayment in 20X5. The loan is classified as a non-current liability in Entity X’s financial statements for the year ended 31 December 20X1.

On 31 December 20X2, Entity X has not breached any provisions of the loan agreement and does not expect to do so in the foreseeable future. However, at that date, Entity X intends to enter into a refinancing arrangement that will involve voluntary repayment of the loan and taking out a new loan with a different lender.

Entity X has notified the bank of its intentions but has not entered into an irrevocable commitment to repay within 12 months.

In January 20X3 (before the 31 December 20X2 financial statements are authorized for the issue), the refinancing is completed as planned and the loan is repaid.

Entity X should classify the loan as a non-current liability in its financial statements as of 31 December 20X2. At that date, the loan is still due to be settled in 20X5 (i.e., more than 12 months after the reporting period) and Entity X has not given up its unconditional right to defer settlement.

The voluntary repayment after the reporting period is a non-adjusting event which, if material, should be disclosed (including, potentially, the impact on liquidity) by IAS 10.

Breaches of covenants (entities that have adopted the January 2020 amendments)

When a condition of a long-term loan arrangement is breached on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as current. This is so, even if the lender has agreed, after the reporting period and before authorization of the financial statements for the issue, not to demand payment as a consequence of the breach.

The liability is classified as current because, at the end of the reporting period, the entity does not have the right to defer settlement for at least 12 months after that date.

The liability is classified as non-current if the lender agrees before the end of the reporting period to provide a period of grace (i.e., a period within which the entity can rectify the breach and during which the lender cannot demand immediate repayment) ending at least 12 months after the reporting period.

IAS 1 also includes guidance regarding when an entity’s right to defer settlement of liability is subject to the entity’s compliance with specified conditions.

Non-adjusting events after the reporting period (entities that have adopted the January 2020 amendments)

If the following events occur between the end of the reporting period and the date the financial statements are authorized for issue, those events are disclosed as non-adjusting events by IAS 10:

• refinancing on a long-term basis of a liability classified as current;
• rectification of a breach of a long-term loan arrangement classified as current;
• the granting by the lender of a period of grace to rectify a breach of a long-term loan arrangement classified as current; and
• settlement of a liability classified as non-current.

Liabilities classified as non-current (entities that have adopted the January 2020 amendments)

All liabilities other than those that meet the definition of a current liability at 4.3A.2 are classified as non-current. [IAS 1:69]

Current/non-current liabilities – examples (entities that have adopted the January 2020 amendments)

Classification of refundable deposits

Current/non-current: classification of refundable deposits – example (entities that have adopted the January 2020 amendments)

A primary school requires a deposit to be paid upon enrolment into the school. Should the student leave the school, this deposit is refundable with one school term’s notice (four months). The majority of students enroll in just one primary school and, having completed the seven-year study period, receive the deposit back at the end of those seven years.

Despite the historical evidence that indicates that the majority of the deposits are only repaid after seven years, the deposits are repayable on four months’ notice.

IAS 1 states that liability should be classified as current when the entity does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. Therefore, the deposits should be classified as current liabilities.

It may be appropriate to disclose why the amounts are presented as current liabilities.

Classification of a callable term loan

Current/non-current: classification of a callable term loan – example (entities that have adopted the January 2020 amendments)

Entity A borrows funds from Bank B for which repayment is scheduled over five years. However, Bank B retains a right (either using a specific clause in the loan agreement or by the inclusion of a cross-reference to the bank’s general terms of business) to call for repayment at any time without cause.

Entity A should classify the loan as current if Entity B’s right to call for repayment at any time without cause is enforceable. IAS 1 requires that liability should be classified as current if the borrowing entity “does not have the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period”.

Classification of non-derivative financial liabilities

The following example considers the situation in which the amortized cost of a liability at the end of the reporting period exceeds its principal amount (e.g., due to accrued unpaid interest).

Current/non-current: classification of non-derivative financial liabilities – example (entities that have adopted the January 2020 amendments)

An entity issues a 6 per cent CU100 million bond at par on 30 June 20X0. The bond is repayable at par 10 years after issuance on 30 June 20Y0. The interest of CU6 million is paid annually. There are no issue costs. The liability is measured at amortized cost using an effective interest rate of 6 percent. For illustrative purposes only, it is assumed the amortized cost of the bond is CU103 million on 31 December 20X0.

Two approaches to classifying the carrying amount of the bond as current or non-current are acceptable under IFRS Standards. An entity should adopt one of the following methods as an accounting policy choice and should apply it consistently according to IAS 8:13.

One approach is to present the entire amortized cost carrying amount of CU103 million in non-current liabilities. IAS 1:71 supports this classification because:

• the liability is not expected to be settled in the entity’s normal operating cycle;
• the liability is not held primarily for trading;
• the liability is not due until 20Y0 (i.e., the principal is not expected to be settled within 12 months of the end of the reporting period); and
• the 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.

Under this approach, interest on the bond is viewed as servicing of the liability instead of its settlement. Therefore, the amount of interest to be paid within 12 months of the end of the reporting period does not constitute the ‘current portion of non-current financial liabilities’ described in IAS 1. The current portion of the bond would be the portion of its principal amount repayable within 12 months of the reporting period.

The alternative method is to present CU3 million (i.e., the difference between the amortized cost carrying amount and the par value repayable on maturity) separately as a current liability. This current liability represents interest accrued at the year-end. The remaining carrying amount of CU100 million would be classified as a non-current liability.

The effective date of January 2020 amendments to IAS 1

The January 2020 amendments to IAS 1 are effective retrospectively for annual periods beginning on or after 1 January 2023 with earlier application permitted. If an entity applies the amendments for an earlier period, it should disclose that fact.

Classification based on normal operating cycle An entity produces airplanes. The length of time between first purchasing raw materials to make the planes and the date when the entity completes the production and delivery is 10 months. The entity receives payment for the planes six months after delivery. (a)   How should the entity show its inventory and trade receivables in its classified balance sheet? The time between the first purchase of goods and the realization of those goods in cash is 16 months (10 months + 6 months). The age of inventory held by the entity at the year-end will range between zero months to 10 months; and, once the goods are delivered, it will take a further six months to receive payment. All of the inventory should be classified as a current asset, even though some of the inventory will not be realized in cash within 12 months of the reporting period. This is because the inventory is realized in the entity’s normal operating cycle. However, the entity should disclose the expected date of recovery of the inventory. The trade receivables will be realized in cash within 12 months of the reporting period and are included as a current asset. (b)   Would the answer to (a) be different if the production time was 14 months, and the time between delivery and payment was a further 15 months? No. The inventory and trade receivables are still classified as current assets. In this case, the inventory is, on average, older but it is still realized in cash in the entity’s normal operating cycle. Similarly, the trade receivables are realized in cash as part of the operating cycle and are classified as a current asset, even though they will not be realized in cash within 12 months of the year’s end. The entity should disclose the expected date of recovery of the inventory and the maturity date of the trade receivables.

Presentation of additional line items, headings, and subtotals

Additional line items, headings, and subtotals are presented in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. For this purpose, the line items listed in IAS 1 may be disaggregated.

The judgment as to whether additional items are presented separately is based on an assessment of:

• the nature and liquidity of the assets;
• the function of the assets within the entity; and
• the amounts, nature, and timing of liabilities.

The use of different measurement bases for different classes of assets suggests that their nature or function differs and, therefore, that they should be presented as separate line items.

For example, different classes of property, plant, and equipment can be carried at cost or revalued amounts by IAS 16.

When an entity presents additional subtotals in the statement of financial position, by IAS 1, those subtotals should:

• be comprised of line items made up of amounts recognized and measured by IFRS Standards;
• be presented and labeled in a manner that makes the line items that constitute the subtotal understandable. For example, if an entity presents a commonly reported subtotal, but excludes items that would normally be considered as part of that subtotal, the label should reflect what has been excluded;
• be consistent from period to period; and
• not be displayed with more prominence than the subtotals and totals required in IFRS Standards for the statement of financial position.

Presentation of cash and cash equivalents

The separate line item in the statement of financial position for ‘cash and cash equivalents’ does not necessarily correspond to ‘cash and cash equivalents’ as defined in IAS 7.

IAS 7 acknowledges this fact by requiring a reconciliation of the amount of cash and cash equivalents in the statement of cash flows with the equivalent line item reported in the statement of financial position.

IAS 7 states that bank overdrafts repayable on demand may be classified as a component of cash and cash equivalents for the statement of cash flows when they form an integral part of an entity’s cash management.

IAS 7 notes that a characteristic of such banking arrangements is that the balance often fluctuates from being positive to overdrawn.

Even when such overdrafts are classified as a component of cash and cash equivalents under IAS 7, it will not generally be appropriate for them to be netted against cash and cash equivalent assets to present the ‘cash and cash equivalents’ line item in the statement of financial position. Such overdrafts should be netted against positive cash balances only when the more restrictive offset criteria of IAS 32 are met.

When the amounts presented for cash and cash equivalents in the statements of financial position and cash flows are different, entities may wish to consider using different descriptions to avoid confusion; for example, the amount presented in the statement of financial position could be described as ‘cash and bank balances’.

IAS 1 permits the use of alternative descriptions in this manner. However, even when different descriptions are used in the two statements, the requirement to present a reconciliation under IAS 7 applies.

Liabilities relating to ‘reverse factoring’ or ‘supplier financing’ arrangements

A purchaser of goods or services may enter into a variety of arrangements under which a ‘factor‘ (typically, a financial institution) pays the supplier on its behalf, with the purchaser then reimbursing the factor (plus making payment for interest and charges when applicable) at a later date. As such, the purchaser continues to have a liability until that later date.

Such arrangements are referred to by several names including ‘supplier financing’, ‘reverse factoring’, and ‘structured payable arrangements’, and can be structured in several ways, often using a tripartite arrangement entered into by the purchaser, the supplier, and the factor.

These arrangements can benefit both the purchaser and the supplier in liquidity terms as well as potentially:

• allowing the purchaser to access early payment discounts with the supplier whilst deferring payment of cash to the factor until a date later than the due date of the invoice from its supplier;
• reducing the supplier’s exposure to credit risk;
• allowing the supplier to, effectively, access finance based on the purchaser’s credit rating (which may be better than its own);
• facilitating the management and payment of the invoices; and
• strengthening business relationships between the purchaser and the supplier.

The specific terms and conditions of supplier financing vary but may include the following.

• The purchaser instigates the program and selects the supplier invoices that are subject to the arrangement.
• The arrangement continues to be applied for future invoices arising with the selected suppliers.
• The factor agrees to pay the supplier in time to access an early payment discount (either the discount available to the purchaser or one negotiated separately between the supplier and the factor). The supplier might also offer an additional discount in return for the credit enhancement of being owed money by the factor (who may have a higher credit rating than the purchaser).
• The factor will enforce its right to receive additional interest in the event of late payment by the purchaser. Often in a typical purchaser and supplier relationship late payment from the purchaser to the supplier does not result in the supplier enforcing its right to charge the purchaser interest on late payments.
• The factor takes on the credit risk of the purchaser and makes a profit from any or all of the:

o interest charged to the purchaser on extended finance;

o fees charged to the purchaser;

o making a return from paying the supplier less (through an early payment discount) than it recovers from the purchaser.

The purchaser will need to consider how to present the financial liabilities relating to supplier financing arrangements in its statement of financial position.

Assessing the presentation of ‘reverse factoring’ or ‘supplier financing’ arrangements

IAS 1 requires ‘trade and other payables’ to be presented separately from other financial liabilities as ‘trade and other payables’ are sufficiently different in nature of function from other financial liabilities to warrant separate presentation.

Additionally, IAS 1 requires the presentation of additional line items when such presentation is relevant to an understanding of the entity’s financial position. As such, it should be determined whether to present liabilities that are part of a reverse factoring arrangement either:

• within the trade and other payables;
• within other financial liabilities; or
• as a line item separate from other items in its statement of financial position.

IAS 37 describes trade payables as

“liabilities to pay for goods and services that have been received or supplied and have been invoiced or formally agreed with the supplier”.

Additionally, IAS 1 explains that “some current liabilities, such as trade payables… are part of the working capital used in the entity’s normal operating cycle”. As such, a financial liability should only be presented as a trade payable when it has all of the following characteristics:

• it represents a liability to pay for goods or services;
• it is invoiced or formally agreed with the supplier; and
• it is part of the working capital used in the entity’s normal operating cycle.

When items are dissimilar or function, IAS 1 requires them to be presented separately unless immaterial. Additionally, IAS 1 specifies that line items are included in the statement of financial position when the size, and nature of the function of an item (or aggregation of similar items) is such that a separate presentation is relevant to an understanding of the entity’s financial position. Accordingly, in applying IAS 1, liabilities that are part of a reverse factoring arrangement should be presented:

• as part of ‘trade and other payables’ only when those liabilities have a similar nature and function to trade payables (e.g., when those liabilities are part of the working capital used in the entity’s normal operating cycle); or
• separately when the size, nature or function of those liabilities makes separate presentation relevant to an understanding of the entity’s financial position. In assessing whether it is required to present such liabilities separately (including whether to disaggregate trade and other payables), an entity should consider the amounts, nature, and timing of those liabilities.

This conclusion was confirmed by the IFRS Interpretations Committee in the December 2020 IFRIC Update.

To implement this conclusion, a comprehensive assessment of the arrangement should be made to determine the nature of the liability (e.g., trade and other payables or borrowings) that exists in respect of a supplier financing arrangement. The following may be relevant to this consideration.

• The extent of any ongoing contractual relationship between purchaser and supplier:

o whether the purchaser’s liability to the supplier is legally extinguished when the supplier is paid cash by the factor, or whether it                         remains in existence until the purchaser’s final payment is made;

o whether the supplier has recourse to the purchaser if the factor fails to make a payment when contractually due; and or whether the purchaser retains any right to withhold payment to the factor if goods from the supplier are found to be faulty.

• Whether the amount and timing of cash flows due and other terms of the liability are more consistent with a trade payable or with a borrowing:

o the extent to which the arrangement extends the term of the liability beyond the period available from the supplier or in its industry                  more generally;

o whether the rate of interest payable (either directly or indirectly) on the liability is more consistent with the purchaser’s general                         borrowing rates from financial institutions or with rates payable on overdue invoices from its suppliers;

o the seniority of the liability due to the factor compared to payables due to suppliers; and or whether the purchaser provides additional security, e.g., guarantees or collateral, that is more consistent with a borrowing transaction than with a customer-supplier relationship.

The classification should reflect the substance of the arrangement.

As noted in the conclusion reached by the IFRS Committee, the entity should also assess whether a liability that is part of a reverse factoring arrangement should be presented separately in the statement of financial position.

For example, whilst the liability may be similar and function to trade payables, it may be necessary to present it separately from ‘trade and other payables’ to distinguish amounts now due to a financial institution. Such a disaggregation may be provided on the face of the statement of financial position or in the notes to the financial statements.

Whichever classification is deemed appropriate, clear disclosure should be provided of the following:

• the entity’s approach to the presentation of significant supplier financing arrangements and (by IAS 1) the judgments made in applying that policy;
• the carrying amount of the liabilities in question and the line item(s) in which they are presented;
• how supplier financing transactions have been reflected in the entity’s statement of cash flows; and
• when supplier financing arrangements have been used as a tool to manage liquidity risk, the disclosures required by IFRS 7.

In determining an appropriate approach to the presentation of supplier financing arrangements and the level of associated disclosure required, consideration should be given to all relevant facts and circumstances as well as to the views of relevant securities regulators and other enforcers.

Classification of an inter-company receivable due on demand A parent provides a loan to a subsidiary. An interest of 8% is paid annually. The loan is repayable on demand. How should the loan receivable be classified in the parent’s balance sheet? The demand feature might be primarily a form of protection or a tax-driven feature of the loan. Both parties might expect and intend that the loan will remain outstanding for the foreseeable future. If so, the instrument is, in substance, long-term in nature, and the parent classifies it as a non-current asset. The parent classifies the loan as a current asset if the parties intend that it will be repaid within 12 months of the reporting period. The subsidiary classifies the liability as current, because it does not have the right to defer repayment for more than 12 months, regardless of the parties’ intentions. The classification of the instrument could affect initial recognition and subsequent measurement. This might require the entity’s management to exercise judgment, which could require disclosure under judgments and estimates.

Tax assets

Deferred tax assets should not be classified as current, regardless of the period over which they are expected to be recovered.

Can an entity present deferred tax as neither current nor non-current? Deferred tax assets and liabilities cannot be classified as current. We consider that entities presenting a current/non-current classified balance sheet should not show deferred tax assets and deferred tax liabilities as separate categories; that is, they should show deferred tax assets as neither current nor non-current, with the same approach adopted for liabilities. IAS 1 states that a mixed presentation might be appropriate in certain circumstances but deferred tax assets and liabilities arise in the financial statements of most entities. In our view, it is not the standard’s intention that the use of mixed presentation would be available or appropriate to all entities.

Current tax recoverables should be classified as current where they are expected to be realized within 12 months of the reporting period; otherwise, they should be shown as non-current assets.