Financial Accounting Review: Current Liabilities

Here are the important concepts relating to current liabilities:

1. Classification – IAS 1, paragraph 69, provides that an entity shall classify a liability as current when:

a. The entity expects to settle the liability within the entity’s operating cycle.

b. The entity holds the liability primarily for the purpose of trading.

c. The liability is due to be settled within twelve months after the reporting period.

d. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

2. Measurement – at face amount due to immateriality of the difference between face amount and present value

3. Presentation – IAS 1, paragraph 54, indicates as a minimum, the face of the statement of financial position shall include the following line items for current liabilities:

a. Trade and other payables

b. Current provisions

c. Short-term borrowing

d. Current portion of long-term debt

e. Current tax liability