Refinancing Short Term Obligations

Question 1

What are the two criteria for reclassifying current liabilities as noncurrent?

Answer 1

-Intent and ability

Question 2

What are the 3 ways of demonstrating ability? (Remember these must occur between BS date and date of FS issuance)

Answer 2

• Actually refinance on long term basis
• Enter into a noncancelable refinancing agreement
• Issue equity securities replacing the debt

Question 3

What is the primary difference between IFRS and GAAP for refinancing Short Term Obligations?

Answer 3

-IFRS requires debtor exhibit ability to refinance before balance sheet date