Question

Liabilities paid within the coming year are classified as long term liabilities if refinancing is completed before the date of issuance of the financial statements under which accounting standards?

1) GAAP
2) IFRS
3) Both

Answer 1

Both GAAP and IFRS allow liabilities due within the coming year to be classified as long-term if refinancing is completed before the financial statements are issued.

Step-by-step explanation:

Liabilities that are expected to be paid within the coming year can still be classified as long-term liabilities if refinancing is completed before the date of issuance of the financial statements. According to Generally Accepted Accounting Principles (GAAP), this reclassification is permissible, allowing companies more flexibility in presenting their financial position.

The International Financial Reporting Standards (IFRS) also have similar provisions, although specifics may vary. Both accounting standards recognize that the nature of liabilities can change with new financing agreements.

Liabilities paid within the coming year are classified as long term liabilities if refinancing is completed before the date of issuance of the financial statements under both GAAP and IFRS.

Answer 2

Liabilities due within the next year can be classified as long-term under GAAP if refinancing is completed before the issuance of financial statements, but there isn't an equivalent specific provision in IFRS.

Step-by-step explanation:

Under GAAP (Generally Accepted Accounting Principles), liabilities that are due within the next year can be classified as long-term if the company completes refinancing of the obligation before the financial statements are issued. However, such a provision is not specifically addressed in the IFRS (International Financial Reporting Standards) in the same way. This question pertains to the classification of liabilities on the balance sheet, and such categorization can affect the financial analysis of a company.

This classification impacts financial ratios and the company's perceived stability. Companies often engage in refinancing to take advantage of favorable interest rates, extend the maturity of debt, and improve liquidity ratios.Long-term liabilities are a company's financial obligations that are due more than one year in the future.

The current portion of long-term debt is listed separately on the balance sheet to provide a more accurate view of a company's current liquidity and the company’s ability to pay current liabilities as they become due. Long-term liabilities are also called long-term debt or noncurrent liabilities.