At reporting date for Year 1, Elpha Limited had a loan from its bankers that it expected to settle within three months. The loan term was renegotiated after reporting date and before the authorisation date of the financial statements, and the repayment date was extended by two years. For Year 1 financial statement presentation purposes this loan is classified by Elpha Limited as:
A) a non-current liability;
B) a current liability;
C) a contingent liability;
D) an off-statement of financial position liability.

Question

Quizplus · Accepted Answer

At reporting date for Year 1, Elpha Limited expected to settle the loan within three months, which would classify it as a current liability in the Year 1 financial statements. Since the loan term was renegotiated after reporting date but before the authorization date of the financial statements, and the repayment date was extended by two years, it would still be classified as a current liability because it will be due within one year from the authorization date.

At Reporting Date for Year 1, Elpha Limited Had a Loan