If liabilities are disclosed as current on the basis of the entity's operating cycle,and this cycle is greater than 12 months it should:
A) adjust the statement of financial position for a 12 month period.
B) disclose the length of the operating cycle.
C) apply the 12-month test.
D) None of the given answers are correct.

Question

Quizplus · Accepted Answer

If an entity's operating cycle is greater than 12 months and liabilities are disclosed as current on this basis, it should disclose the length of the operating cycle in the notes to the financial statements. This is according to IAS 1 (Paragraph 69). Adjusting the statement of financial position for a 12-month period would not be appropriate as it does not reflect the true nature of the liabilities. Applying the 12-month test is also not applicable in this situation. Therefore, the best option is to disclose the length of the operating cycle in the notes. Thus, Option B is correct.

If Liabilities Are Disclosed as Current on the Basis of the Entity's