Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line. The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.
Centre for Financial Reporting. Login or Register Deloitte User? Welcome My account Logout. In this situation, the debt should be classified as long-term. An example of this situation would be a maturing bond issue where contractual arrangements have been made for long-term refinancing. CICA Handbook In other situations, debt is scheduled to mature within one year from the balance sheet date or is otherwise callable by the lender however, the organization intends to renegotiate or refinance the obligation on a long-term basis.
CICA Handbook EIC provides that this debt can only be excluded from current liabilities if this intent is supported by an ability to successfully complete the refinancing. This ability can be demonstrated in either of the following ways:.
No violation of any provision in the financing agreement exists at the balance sheet date and no available information indicates that a violation has occurred thereafter but prior to the completion of the balance sheet or, if one exists at the balance sheet date or has occurred thereafter, a waiver has been obtained;.
The lender with which the organization has entered into the financing agreement is expected to be financially capable of honouring the agreement. The debt agreement signed by an organization will include a number of requirements that must be met by the organization. These can be quite straightforward, such as providing a set of audited financial statements, or be more demanding, such as the maintenance of limits on certain activities or expenditure levels of the organization.
As well, agreements for debt that mature beyond one year normally include a number of financial tests which must be met. These tests typically include maintenance of specified financial ratios over a period of time or at a specific point in time.
These covenants can sometimes be quite onerous and it is not uncommon for an organization to violate one or more of them. When there is a covenant violation at the balance sheet date that gives the lender the right to demand payment of the debt within one year of the date of the balance sheet, the CICA Handbook EIC requires that the debt be reclassified as a current liability unless the following conditions are met:.
Classification of long-term debt as current often results in a working capital deficiency which may demonstrate an inability to pay liabilities as they come due. This situation is discussed below in the section addressing going-concern considerations.
It indicates that:. If the creditor is callable because of violations of certain provisions of the debt agreement, the creditor needs to waive its right only with regard to those specific violations. Examples are given of circumstances where the creditor would lose the right to demand repayment. These include situations where the debtor has cured the violation after the balance sheet date and the debt is not callable at the time the financial statements are issued or the debt has been refinanced on a long-term basis.
Even when the debt agreement contains a grace period and contractual arrangements have been made which ensure that the violation will be cured within the grace period, an organization continuing to disclose the debt as long-term must disclose the circumstances of its violation and the substance of the contractual arrangements.
The CICA Handbook EIC highlights that fact that the violation of a covenant on one debt obligation may result in violations on other debt obligations. An organization needs to take account of all cross-violation clauses and the reclassification of other debt, in determining whether covenants applicable to a particular debt obligation have been violated.
The CICA Handbook EIC addresses the situation where an organization is in compliance with debt covenants at year end without the need for the temporary elimination, modification or waiver of covenants but it appears likely that it may violate one or more covenants during the next fiscal year that will give the lender the right to demand repayment.
Further, if the covenant violation occurs after the end of the fiscal year but before the date of completion of the financial statements, a subsequent-events note should be included describing the nature and adverse consequences of the violation. Because not-for-profit organizations are now more likely to have debt obligations, they are more dependent on the support of third parties for their survival.
Lenders have to be willing to continue to extend lines of credit to an organization for it to be able to continue operating. When this situation arises, whether or not the organization is a going concern has to be assessed and the financial statements may require additional disclosures and possibly reclassifications of assets and liabilities. Financial statements are prepared under the presumption that an organization is going to continue operating for the foreseeable future.
As a result, the expectation is that the assets and liabilities of the organization will be realized and discharged, respectively, in the normal course of operations. If an organization is not expected to continue operating, the normal approach to valuing assets and liabilities may no longer be appropriate. Therefore, in preparing a set of financial statements, management must consider the ability of the organization to continue as a going concern.
Auditors reconsider this presumption on an annual basis and extend their enquiries when the presumption appears doubtful. There are a number of warning signs that point to the potential inability of an organization to continue as a going concern.
When one or more of these signs is present, auditors must extend their procedures to satisfy themselves that the going-concern assumption is appropriate.
Login or Register Deloitte User? Welcome My account Logout. Search site. Toggle navigation. Quick Article Links. New lease accounting standards: Lessons learned from public companies Jun 20, Related Projects. See Legal for more information. DTTL also referred to as "Deloitte Global" and each of its member firms are legally separate and independent entities. DTTL does not provide services to clients. Please see www. Correction list for hyphenation These words serve as exceptions.
Paragraphs
0コメント