The criteria for classifying a liability as current and the right to defer

Learning objectives

• Determine the classification of a liability on the basis of the right, at the end of the reporting period, to defer settlement.L1
• Calculate the non-current portion of a loan from the maturities given in the case.L1, L2, L3

Normative references

• IAS 1 §69A liability is current when it is expected to be settled in the normal operating cycle, is held primarily for the purpose of trading, is due to be settled within twelve months after the reporting period, or when the entity does not have, at the end of the reporting period, the right to defer settlement for at least twelve months after the reporting period; all other liabilities are non-current.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

5 questions

• A borrowing falls due in eight months and, at 31 December, the entity has no right to postpone its repayment beyond twelve months after the period: it is presented as a current liability.L1
• Mistral SA borrowed {total_borrowing} from a bank. At 31 December 2026, two instalments are due within 12 months: {instalment_june_2027} on 30 June 2027 and {instalment_december_2027} on 31 December 2027. Case facts: at the closing date, Mistral has the right to defer settlement of all the later instalments for more than 12 months. Calculate the current portion, then the non-current portion of the borrowing.L2
• At 31 December 2026, Opale SA has four liabilities. Loan A (EUR 2,000,000) is due on 31 August 2027. Loan B (EUR 3,000,000) has a contractual maturity in 2030, but the lender may demand repayment at any time. Loan C (EUR 1,500,000) has a maturity in 2030, with no early repayment clause. A trade payable of EUR 800,000 will be settled in 14 months, Opale's normal operating cycle being 16 months (case facts). What is the total of the current liabilities among these four items?L3
• Under the January 2020 amendment to IAS 1, the classification of a liability as current or non-current depends on management's intention to settle it within 12 months.L1
• At 31 December 2026, Zephyr SA must repay a loan of EUR 3,000,000 in 2029 and, at the closing date, has the right to defer that settlement beyond 12 months (case facts). Its management nevertheless considers repaying early in June 2027, without being compelled to. How is the loan classified at 31 December 2026?L2