Short-term debt expected to be refinanced
A)may be classified as long term if both the intent to refinance and the ability to refinance exist
B)must always be reported as a current liability
C)may be classified as long term if off-balance-sheet financing has been obtained
D)may be classified as long term if there is an intent to refinance

Question

Quizplus · Accepted Answer

Short-term debt expected to be refinanced may be classified as long-term if both the intent to refinance and the ability to refinance exist. This is in accordance with the accounting principle of substance over form, which considers the underlying economic reality of a transaction rather than just its legal form. If the company has the actual ability to refinance the short-term debt with long-term financing, and intends to do so, then the debt can be classified as long-term.

Short-Term Debt Expected to Be Refinanced