Question

CP P11-24. Current versus non-current liabilities--balance sheet classification of maturing liabilities (L.O. 11-2) Medium - 5 minutes) Explain how a long-term loan maturing within one year of the balance sheet date is reported in the financial statements, assuming that the company intends to renew the liability for a further five years. oblastiane in default

Answer 1

Long-term liabilities or non-current liabilities means any liability having a maturity period more than 1 year and whereas any liability having maturity period equal to one year or less than one year are called short-term liabilities or current liabilities.

Long-term loans are usually reported under Long-term liabilities or non-current liabilities and even such long-term loans maturing within one year of the balance sheet date and also if the company intends to renew the liability for 5 years.

Because once the long-term loan that was reported under Long-term liabilities for last 4 years and in the current year when it matures, it can't be reported under current liability as it is still long-term liability. Also, if the company intends to renew it, it still will be reported under long-term liability because its nature is long-term that is more than 1 year.