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ACCA Applied Skills · Financial Reporting · Preparation of single entity financial statements

At 31 December 20X5 Orla Co has a bank loan of $600,000. Of this, $150,000 is repayable on 30 June 20X6 and the remainder on 31 December 20X8. Orla Co has no right to defer settlement of the $150,000 beyond 12 months. How should the loan be presented in the statement of financial position at 31 December 20X5 under IAS 1?

The loan is split: $150,000 repayable within twelve months of the reporting date is a current liability because there is no right to defer settlement, and the remaining $450,000 due in 20X8 is a non-current liability. IAS 1 classifies by settlement date.

  1. ACurrent liabilities $600,000
  2. BCurrent liabilities $150,000 and non-current liabilities $450,000Correct
  3. CNon-current liabilities $600,000
  4. DNon-current liabilities $150,000 and current liabilities $450,000

Explanation

The portion due within 12 months after the reporting date, with no right to defer, is classified as current: $150,000. The remaining $450,000 ($600,000 - $150,000) is due after more than 12 months and is non-current. Showing the whole loan as current or non-current ignores the split.

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