Final answer:
To refinance under IFRS, a company must agree to the terms of refinancing with a lender before the reporting period ends, have a reasonable expectation to meet the new terms, and secure an extension for at least twelve months post-reporting period. The refinancing agreement must be completed before financial statements are issued.
Step-by-step explanation:
When looking to refinance under International Financial Reporting Standards (IFRS), a company must meet certain criteria to enable the reclassification of a financial liability from current to non-current. This is typically pursued when a company needs to improve its current ratio or manage its short-term obligations more efficiently. Some key conditions include the agreement to the terms of refinancing or restructuring the obligation with the lender before the reporting period ends, and the management must have a reasonable expectation that it will meet these new terms. Furthermore, the company must obtain an agreement from the lender for an extension of the repayment period to at least twelve months after the reporting period. It is critical that the refinancing agreement is completed before the financial statements are authorized for issue.
If these conditions are not met, the obligation continues to be classified as a current liability. This aspect of financial accounting under IFRS is essential for accurate representation of a company's financial position to its stakeholders.