CFA Level I · CFA Level I Exam · Analyzing Balance Sheets
At year-end, a company has a 600 loan due in 8 months that it intends to refinance. Its lender agreement gives it no right at the reporting date to defer settlement beyond 12 months. Under IFRS, the loan is most likely classified as:
The loan is most likely a current liability. Under IFRS, classification depends on whether the entity has a right at the reporting date to defer settlement for at least twelve months, and management's intention to refinance does not provide that right.
- Aa current liability, because no right to defer settlement exists at the reporting dateCorrect
- Ba non-current liability, because management intends to refinance
- Can equity component, because refinancing is intended
Explanation
IAS 1 bases classification on the right at the reporting date to defer settlement for at least 12 months. Intent to refinance does not create that right. The loan is therefore current.
Did you get it right without looking?
One question tells you little. A timed set on Analyzing Balance Sheets shows your real accuracy, how long you take and where you lose marks.
More Analyzing Balance Sheets questions
- In a common-size analysis, a company's inventory rises from 18% to 30% of total assets while cash falls from 15% to 6% of total assets. This…
- An analyst compares two otherwise identical banks. Bank X classifies its bond portfolio as measured at amortized cost, and Bank Y classifies…
- A company reports cash of 120, marketable securities of 80, receivables of 200, inventory of 300 and current liabilities of 500 (all in € th…
- Under IFRS, a company presents its statement of financial position using a current/non-current classification. Which of the following items …
- Under IFRS, a company that uses the revaluation model for a class of property, plant and equipment records a revaluation increase above the …
- A company's accumulated other comprehensive income (AOCI) most likely includes: