On December 31, 2020, Gumble Ltd. has $ 3,150,000 in short-term notes payable due on February 14, 2021. On January 10, 2021, Gumble arranged a line of credit with Caldi Bank, which allows Gumble to borrow up to $ 2,000,000 at 2% above the prime rate for three years. On February 2, 2021, Gumble borrowed $ 1,400,000 from Caldi Bank and used $ 600,000 additional cash to liquidate $ 1,200,000 of the short-term notes payable. Assuming Gumble adheres to IFRS, the amount of the short-term notes payable that should be reported as current liabilities on Gumble's December 31, 2020 statement of financial position (to be issued on March 5, 2021) is
A) $ 0.
B) $ 600,000.
C) $ 1,400,000.
D) $ 3,150,000.

Question

Quizplus · Accepted Answer

Under IFRS, liabilities are classified as current unless the entity has an unconditional right to defer settlement for at least twelve months after the reporting period. Since Gumble did not have the financing arrangement in place before December 31, 2020, all of the short-term notes payable are considered current liabilities as of that date.