What is Short-term obligations expected to be refinanced?
In short
A short-term obligation can be classified as noncurrent if the company intends to refinance it on a long-term basis and demonstrates that it can, for example by refinancing it after the balance sheet date but before the statements are issued.
Key takeaways
- Intention alone is not enough; the ability must be demonstrated.
- A firm financing agreement entered into before the statements are issued also demonstrates ability.
- Only the amount actually refinanced, or available under the agreement, is reclassified.
Where it's tested
FAR: Current Liabilities, Contingencies & Commitments — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Short-term debt maturing within one year may be classified as noncurrent if the entity: