When a company has debt coming due and wants to refinance and classify the debt as a long-term liability rather than paying for it currently with cash:
A)U.S.GAAP requires the debt be refinanced by the balance sheet date and IFRS requires that the company have intent to refinance on a long-term basis.
B)U.S.GAAP requires that the company have intent to refinance the debt on a long-term basis and IFRS requires the debt be refinanced by the balance sheet date.
C)U.S.GAAP requires that the company have intent and ability to refinance the debt on a long-term basis and IFRS requires the debt be refinanced by the balance sheet date.
D)U.S.GAAP requires the debt be refinanced within 60 days of the balance sheet date and IFRS requires the debt be refinanced by within 30 days of the balance sheet date.

Question

Quizplus · Accepted Answer

According to U.S.GAAP, in order to classify debt as a long-term liability, the company must have both the intent and ability to refinance the debt on a long-term basis. Under IFRS, the debt must be refinanced by the balance sheet date. Option A, B, and D are incorrect as they provide incorrect information.

When a Company Has Debt Coming Due and Wants to Refinance