Question

Briefly write about the exclusions in current maturities of long term debt with examples.

Answer 1

Current maturities of long-term debt refers to the portion of a company's liabilities that are coming due in the next 12 months. Such portion of the long term debt is reported as current liablity in the balance sheet. However, the current portion of long term debt should not be reported as a current liability in a few cases. These cases are referred as exceptions.

If there exists a reasonable evidence that the current maturity will be:

1. Paid off using a non-current or fixed asset specifically restricted for this purpose

2. Paid off using the proceeds of a new long-term debt issue;

3. Be converted into company’s common stock

4. Re-financed through a refinancing arrangement