FASB issues revised proposal to improve balance sheet debt classification

Written on Sep 16, 2019

FASB has issued a proposed Accounting Standards proposed Accounting Standards Update (ASU) intended to improve guidance used to determine whether debt should be classified as a current or noncurrent liability in a classified balance sheet. 


In January 2017, FASB issued its first proposal on the project, which contained provisions to replace the current, fact-specific guidance with an overarching, cohesive principle for determining whether debt, or other instruments within the scope of the proposal, should be classified as a current or noncurrent liability as of the balance sheet date.

Much of the guidance in this revised proposal is similar to the original 2017 proposal on which FASB has received extensive feedback. Based on input received from stakeholders—including the Private Company Council—the Board added proposed requirements related to unused long-term financing arrangements, such as a line of credit, and grace periods. The revised proposal reflects and seeks comments on these changes, as well as the expected costs and expected benefits of the proposed amendments.

Stakeholders are encouraged to review and comment on the proposed ASU by Oct. 28, 2019.


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