Question

help!!!

Under U.S. GAAP. liabilities payable within one year can be excluded from current liabilities only if Multiple Choice The business intends to refinance the obligations on a long term basis C ) The business has the demonstrated ability to refinance the obligations on a long term basis O The business has the intent and the aby to refinance the obligation on a long term basis O L e s payable within one year always must be classified as current abilities

Answer 1

Note : Image 2 and 3 are the same questions, hence there are basically 2 MCQs which have been asked in the question

MCQ 1

Answer : "The business has intent and ability to refinance the obligation on a long-term basis".

Logic : When deciding whether a liability is current or non-current, we usually consider whether the management has either the intention or is committed by a contract to pay the same within 12 months. If it is possible for management to refinance the obligation and it also has such intention, then such liability may be shown as a non-current liability instead of a current liability.

MCQ 2

Answer : "Accrue a 15 Million $ liability and explain it in the notes to financial statements".

Logic : A provision should be made for such arbitration decision becuase of following 2 reasons :

1. Conditions relating to event post balance sheet date, i.e. existence of claim against company was there as on 31st March, 2022.

2. It is probable that there will be an outflow of resources since the arbitrator has made a judgement and the company does not plan to file an appeal against the same.