Why this is mistaken
A later borrowing does not automatically support noncurrent classification at year-end. Under ASC 470-10-45-14, management needs both intent and demonstrated ability to refinance on a long-term basis before the applicable statement-issuance endpoint. A completed financing or a qualifying agreement can establish ability.
Under ASC 470-10-45-15, repayment from current assets followed by later borrowing does not qualify merely because cash is replenished. Check the sequence and the amount supported before changing classification.
Where to watch
When this mistake may appear
- A new loan closes before issuance but after the old note was repaid from cash.
Check your work
Your work may contain this mistake if:
- The old note is excluded from current liabilities merely because financing later occurred.