Balance Sheet Classification Of Debt

Simplifying the balance sheet classification of debt last updated on january 14 2020.

Balance sheet classification of debt. If a debt covenant has been violated at the balance sheet date and a waiver has been obtained from the lender for this violation how is the underlying debt classified. A debt investment classified as held to maturity means the business has the intent and ability to hold the bond until it matures. That did not exist at the date of the balance sheet but arose after that date that is a nonrecognized subsequent event. Suzanne stephani pwc director and debt classification specialist joins heather horn to decipher the guidance discuss common questions and provide an update on the fasb s related project.

As a result the fasb has decided to take a look at fasb accounting standards codification topic 470 debt. Instead gaap includes a set of rules that apply to narrow fact patterns. Please refer to the current technical plan for information about the expected release dates of exposure documents and final standards. Balance sheet classificationa balance sheet contains the following classifications a current assets g long term debt b investments h other noncurrent liabilities c property plant and equipment i capital stock d intangible assets j additional paid in capital e other noncurrent assets k retained earnings f current liabilitiesindicate by letter how each of the following.

Fasb chair russell golden said that the unusually long comment period is an effort to offer relief to private companies and accountants who may be busy with tax season. Similarly under the proposed amendments a subsequent refinancing of short term debt with the issuance of equity securities no longer would affect the classification of debt as of the balance sheet date. The current guidance is complex but help is on the way. Refinancing debt but not quite sure how it will impact your balance sheet classification.

A few of the more common issues and factors to consider when determining the appropriate classification of debt include the following. Debt classification is an important factor in the balance sheet as it represents a company s overall financial health. The current guidance in asc 470 10 consists of an assortment of fact specific rules and exceptions the application of which varies depending on multiple factors. Sections updated on the date above are indicated with an asterisk.

Classification valuation the classification is based on the intent of the company as to the length of time it will hold each investment. The fasb plans to release a proposal on balance sheet classification of debt by the end of 2016 or early in 2017 with a comment letter deadline of may 5.