When a debt covenant is violated,the related debt must be classified as current if it is

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When a debt covenant is violated, the related debt must be classified as current if it is probable that the borrower will not be able to cure the default within the next twelve months. This is because current liabilities are debts that are expected to be paid within one year or the operating cycle, whichever is longer. If the borrower is unable to cure the default within the next twelve months, it is likely that the debt will not be paid off within the next year, so it must be classified as a current liability.

When a Debt Covenant Is Violated,the Related Debt Must Be