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

< Older Post

Newer Post >

Tax Alert - New Tax Agent Obligations from 1 July 2025

July 21, 2025

New Tax Agent Obligations from 1 July 2025 From 1 July 2025, “small” firms of tax practitioners (with 100 or less employees) must ensure they are complying with the eight new Code of Professional Conduct obligations from the Tax Practitioners Board ( TPB ). These new Code obligations were introduced by the Government under the Tax Agent Services (Code of Professional Conduct) Determination 2024. The new Code obligations have already commenced for large tax practitioners (with over 100 employees) from 1 January 2025. As tax agents, Lowe Lippmann Chartered Accountants are committed to upholding our professional and regulatory obligations, including with the Tax Agent Services Act 2009 which includes the Code of Professional Conduct as regulated by the TPB.

Audit Lowe Down – Related parties – what should I consider in identifying them?

July 16, 2025

Related parties – what should I consider in identifying them? Related party disclosures is an area that is receiving more scrutiny from stakeholders in both the for-profit and the not-for-profit space. Disclosure of transactions that have occurred with related parties are important since the terms and conditions are often different from those with unrelated parties, in some instances the transactions may have occurred for much lower or even nil consideration. Often one of the biggest challenges for compiling the disclosures is working out who is a related party of an entity. The definition of related parties in AASB 124 Related Party Disclosures is detailed, however we have summarised the definition into various elements below. a. Think about entities who might be related to the reporting entity i.e.: i. through control or significant influence, ii. by the existence of material transactions or iii. dependence on technical information or personnel provided by them. b. Think about people who might be related to the reporting entity, i.e.: i. Key management personnel, including all directors. ii. Close family members of key management personnel (e.g. spouse, child). c. Think about entities that the people identified in b. might control or significant influence, i.e.: i. Family businesses ii. Businesses which a close family member controls (i.e. senior partner in a legal or accounting firm). Once you have identified a complete list of who is potentially a related party, analysis can then be performed to confirm they meet the criteria in AASB 124 and then identify any transactions with these parties. Remember that transactions should be included whether or not a price was charged or whether the transaction was formally documented or not.

Practice Update – July 2025

July 4, 2025

Changes to car thresholds from 1 July The car limit for the 2026 income year is $69,674. This is the highest value that a taxpayer can use to calculate depreciation on a car where they use the car for work or business purposes and they first use or lease the car in the 2026 income year. If a taxpayer is buying a car and the price is more than the car limit, the highest input tax ( GST ) credit they can claim (except in certain circumstances) is one-eleventh of the car limit. For the 2026 income year, the highest input tax credit they can claim is $6,334 (i.e. one-eleventh of $69,674). The luxury car tax ( LCT ) threshold for the 2026 income year is $91,387 for fuel-efficient vehicles, and $80,567 for all other luxury vehicles. Input tax credits need to be claimed within the four-year time limit. A taxpayer cannot claim an input tax credit for luxury car tax when they buy a luxury car, even if they use it for business purposes.