Current or non-current liability?

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. IAS 1, Presentation of Financial Statements, paragraph 60 stipulates that an entity should present current and non current liabilities as separate classifications in its statement of financial position. In what circumstances can an alternative presentation be used in the statement of financial position?

  2. Paragraph 69(a)-(d) of IAS 1, Presentation of Financial Statements, states that liabilities are to be classified as current if any one of four specified conditions is met. Which of the following is not a condition for the classification of a current liability under IAS1?

  3. IFRS 7,Financial Instruments: Disclosures, does not deal with the classification of financial liabilities. Which of the following aspects of accounting does IFRS 7 deal with?

  4. Some current liabilities such as trade payables and employee costs are part of the normal working capital of the entity and the entity classifies the amounts as current even if they are to be settled outside of the 12-month period. There are some current liabilities that are not part of the working capital cycle but are classified as current, Which of the following liabilities is an example of a liability not classified as working capital but still shown as current?

  5. An entity has raised a loan and classified it as a non-current liability in accordance with paragraph 69 of IAS 1 in its financial statements at 31 December 2010. In the statement of financial position at 31 December 2011, the entity reclassified the loan as a current liability as an event after the reporting period resulted in the repayment of the loan. The original settlement date was 31 December 2015. Which of the following statements is correct?

  6. An entity has raised a loan to finance a construction project and classified it as a non-current liability in accordance with paragraph 69 of IAS 1 in its financial statements at 31 December 2010. In the statement of financial position at 31 December 2011, the entity reclassified the loan as a current liability as an event after the reporting period resulted in the repayment of the loan. The original settlement date was 31 December 2015. Which of the following statements is incorrect?

  7. IAS 1 addresses the consequences of a breach of a provision of a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand. What is the accounting treatment of such a loan?

  8. IAS 1 addresses the consequences of a breach of a provision of a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand. Which of the following statements is correct as regards the above provision of IAS 1?

  9. In December 2010, an entity agreed a five year loan agreement with a bank and undertook to comply with certain covenants .The agreement stipulated that, in the event of a failure by the entity to fulfil any of the contractual obligations,the bank had the right to terminate the agreement and the entity would have to repay the loan unless agreement had been made to reschedule the loan. As at 31 December 2011, the entity was not in compliance with the covenants stipulated in the agreement but had negotiated in writing a rescheduling of the loan over a longer period. How should the loan be treated in the financial statements at 31 December 2011?

  10. In October 2010, the IASB published additions to the first part of IFRS 9, 'Financial instruments', on classification and measurement of financial liabilities. The requirements in IAS 39 regarding the classification and measurement of financial liabilities have been retained, including the related application and implementation guidance. What are the measurement categories which IFRS 9 allows for financial liabilities?