Final answer:
Current liabilities can be reclassified as non-current liabilities when there is a reasonable expectation of settlement beyond the next operating cycle or 12 months, typically resulting from an agreement to extend payment terms.
Step-by-step explanation:
Current liabilities are obligations that are expected to be settled within one year or the normal operating cycle of a business, whichever is longer. Non-current liabilities are obligations that are not due within one year or the normal operating cycle of a business.
A current liability can be reclassified as a non-current liability if there is a reasonable expectation that it will be settled after the next operating cycle or 12 months, whichever is longer. This would typically happen when there is an agreement or intention to extend the payment terms.
For example, if a company has a short-term loan that is due in six months but negotiates with the lender to extend the repayment period to two years, the short-term loan can be reclassified as a long-term (non-current) liability.