Audit Lowe Down – Current / non-current liability classification

Lowe Lippmann Chartered Accountants

In the previous blog, we discussed the new standards in place for 31 December 2024, however the current / non-current classification changes deserve a bit more attention.


The revised AASB 101 Presentation of Financial Statements introduces a slightly amended definition of current liabilities and additional guidance around matters such as breaches of covenants, waivers and periods of grace.

Entities should consider the timing of testing of bank covenants since if they are tested:

  • On or before the reporting date – compliance with the covenants is considered in presenting the liability as current or non-current
  • After the reporting date – they are not considered as part of the current / non-current classification.


For example, an entity has a covenant which is tested annually at 31 January 2025, but they do not consider the existence of any potential breach of this covenant when classifying the liability for their 31 December 2024 financials since the testing date is after the reporting period.


However, additional disclosures are now required where an entity is required to give information about the existence of covenants, including facts and circumstances that indicate the entity may have difficulty complying with the covenant.


In the example above, if the entity considered that they may breach the January covenants due to current trading results, then this information would be disclosed in the 31 December 2024 financial statements.


Further disclosures in this example would depend on whether an actual breach occurred:

  • If breach occurred but going concern basis was still appropriate, then this would be disclosed as a non-adjusting event after the reporting date
  • If breach occurred and going concern was no longer appropriate, then the financial statements for 31 December 2024 would be prepared on a non-going concern basis
  • If no breach occurred, then a disclosure would be useful to clarify if facts and circumstances about a potential breach were included.


If an entity receives a waiver or period of grace in relation to a breached covenant, then this should be received by the borrower prior to the reporting period for it to be useful for the financial statements.


Entities should carefully review their loan agreements and covenants, to ensure accurate classification of liabilities under the new guidance since action may need to be taken prior to the end of the reporting period.


Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

Liability limited by a scheme approved under Professional Standards Legislation


Audit Lowe Down – How do we account for the costs incurred when acquiring an asset?

August 26, 2025
How do we account for the costs incurred when acquiring an asset? When we acquire an asset such as property, plant and equipment, intangibles or inventory there are often significant other costs incurred as part of the purchase process, including delivery, stamp duty, installation fees. Whether we capitalise these to the value of the asset or expense them as incurred can make a significant difference to an entity’s reported position or performance. Since we have accounting standards for specific assets, the treatment can vary depending on the asset and the relevant standard. A summary of some common expenses and their treatment under four accounting standards has been included below. The four standards considered are: AASB 102 Inventories AASB 116 Property, Plant and Equipment AASB 138 Intangible Assets AASB 140 Investment Property.

Audit Lowe Down – What are contract assets and contract liabilities that arise under the revenue accounting standards?

August 12, 2025
What are contract assets and contract liabilities that arise under the revenue accounting standards? Deferred revenue, accrued revenue, revenue received in advance, contract assets, contract costs asset, contract liabilities and receivables are all line items we see in the balance sheet in relation to revenue. It can be confusing to understand what these terms mean and whether different words are being used for the same thing.  We have provided a guidance to these and similar terms to enable you to use them confidently and understand their meaning in a balance sheet.

Practice Update – August 2025

August 6, 2025
Paid parental leave changes have now commenced As from 1 July 2025, the amount of Paid Parental Leave available to families increased to 24 weeks, and the amount of Paid Parental Leave that parents can take off at the same time has also increased from two weeks to four weeks. Superannuation will now also be paid on Government Paid Parental Leave from 1 July 2025, at the new super guarantee rate of 12%, paid as a contribution to their nominated superannuation fund. Parents will also benefit from an increase in the weekly payment rate of Paid Parental Leave, increasing from $915.80 to $948.10 (in line with the increase to the National Minimum wage). This means a total increase of $775.20 over the 24-week entitlement.
More Posts