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IAS 1Workpapers (Step 4 of 5)

Workpaper template

Step 4 of 5
WorkpaperIAS 1 — Presentation of Financial StatementsL2 · L3

Current or non-current classification of a borrowing, covenants, reclassification and total of current liabilities

6 missions10 sections to document75 min
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AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

Record the amount of the borrowing, the 12-month repayment schedule, the covenants (test date, required level, position at the closing date) and the waiver agreements with their date. The classification depends on the rights that exist at the closing date and not on the intentions of management: compute the non-current portion, judge the right to defer, prepare the reclassification entry and the total of current liabilities. The amounts, the due dates and the covenant thresholds are case data.

10 sections · 21 blocks · 2 calculations · 1 entry

  • IAS 1 §60
  • IAS 1 §66
  • IAS 1 §69
  • IAS 1 §72A
  • IAS 1 §72B
  • IAS 1 §76ZA

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

6 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Current or non-current classification of borrowings with covenants, reclassification and disclosures
Case tasks documented here
  • Borrowing A: compute the non-current portion.
  • Borrowing A: does the entity have the right to defer settlement at the closing date?
  • Borrowing B: compute the non-current portion before the effect of the covenant.
  • Borrowing B: does the entity have the right to defer at the closing date, in view of the February waiver?
  • Record the reclassification of borrowing B to current.
  • Borrowing C: does the intention to repay in September 20X7 change the classification?
  • Compute the total of current liabilities.
1

Facts and data

Inputs

  • Borrowing: lender, amount, due dates, security, intention of management

    TextRequired

    TERM_LOAN_WITH_ANNUAL_INSTALMENTS_THE_NEXT_DUE_30_JUNE_20X7

  • Covenants: nature, test date, required level, position at the closing date

    Text

    NET_DEBT_TO_EBITDA_TESTED_FROM_31_MARCH_20X7_AND_BELOW_THE_LIMIT_AT_THE_CLOSING_DATE

  • Waiver or renegotiation agreements: date and content

    Text

  • Total amount of the borrowing at the closing date

    Number

    3,600,000

  • Portion due within 12 months under the schedule

    Number

    450,000

  • Amount reclassified from non-current to current

    Number

  • Trade and other current payables

    Number

  • Accrued expenses

    Number

  • Portions due within 12 months of all the borrowings under the schedules

    Number

  • Total current liabilities per the draft statement of financial position

    Number

2

Supporting documents

Evidence

  • Documents obtained and referenced (loan agreement, repayment schedule, covenant compliance certificate, waiver letter)

    EvidenceRequired

3

Analysis of the classification of liabilities

Analysis

IAS 1 §60IAS 1 §66IAS 1 §69IAS 1 §72AIAS 1 §72BIAS 1 §76ZA

  • Points examined: current or non-current classification

    ChecklistRequired

    • Assets and liabilities presented as current and non-current, unless a liquidity presentation is more relevant
    • Criteria of a current asset examined: normal cycle, trading, 12 months, cash
    • Criteria of a current liability examined, including the right to defer settlement for at least 12 months
    • Right to defer with substance and existing at the closing date
    • Covenants to be complied with at the closing date or before: effect on the right; covenants to be complied with afterwards: no effect on the classification
    • Intentions and expectations of management not used as a classification criterion
4

Calculations

Calculations

IAS 1 §69

  • Non-current portion (total amount − portion due within 12 months)

    Calculation

    3,150,000

    Total amount of the borrowing at the closing date ; − Portion due within 12 months under the schedule

  • Total current liabilities

    Calculation

    0

    Trade and other current payables ; Accrued expenses ; Portions due within 12 months of all the borrowings under the schedules ; Amount reclassified from non-current to current

5

Illustrative entries

Entries

  • Reclassification entry to current

    Entry

    Debit Non-current borrowings ← Amount reclassified from non-current to current ; Credit Current borrowings ← Amount reclassified from non-current to current

6

Judgment: right to defer settlement

Judgment

IAS 1 §72AIAS 1 §72B

  • Right to defer settlement at the closing date

    JudgmentRequired

    Right existing at the closing date: portion beyond 12 months classified as non-current

    Right existing at the closing date: portion beyond 12 months classified as non-current / Right not existing at the closing date: borrowing classified as current / Not applicable

    Professional judgment: the right is assessed at the closing date; a waiver obtained after that date does not create a right existing at the closing date.

  • Rationale: covenants to be complied with at the closing date or before, position at the closing date, date of the waiver

    Text

    COVENANT_FIRST_TESTED_AFTER_THE_CLOSING_DATE_SO_IT_DOES_NOT_AFFECT_THE_RIGHT

7

Items to document for the covenant information

Disclosure

IAS 1 §76ZA

  • Information to prepare on a non-current liability subject to covenants

    Checklist

    • Information enabling users to assess the risk that the liability becomes repayable within 12 months
    • Carrying amount of the liability and nature of the covenants concerned
8

Effect on the financial statements

FS impact

  • Effect derived from the entries

    Table

9

Conclusion

Conclusion

  • Classification retained for each borrowing, right to defer at the closing date, non-current portion, reclassification where applicable, total of current liabilities and covenant information

    ConclusionRequired

10

Normative references

References

  • Normative references cited in this workpaper

    References

11

Checks and financial statement impact

  • Borrowing describedPass
  • Right to defer judged and supportedPass
  • Total amount = non-current portion + current portionPass
  • Reclassification entry balancedNot evaluated
  • Recomputed total current liabilities = total per the draft statement of financial positionNot evaluated
Assets
0
Liabilities
0
Profit or loss
0
OCI
0
Equity
0