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Hi sir, i just want to clarify the accounting treatment for the following .
For a bank loan repayable over 5 years.
This should be split between current and non-current liability right .What about a long term loan and a reedeemable preference share ?
They dont have to be split between current and non-current liability right? They just have to be recognised as a non-current liability . Am i right sir ?
Any amount payable in less than 12 months must be classified as a current liability.
Okay sir. In that case, then in june 2015 exam question 5b), the audit risk regarding
the $2m loan borrowed from the bank. It’s stated that this loan is due for repayment over a ten-year period. (10 years is a long term right). In the answer key they stated that this loan should be correctly split between current and non-current liability.
But why in December 2011 exam question 3(b), regarding the long term loan finance. Why they didn’t state that this long term loan should be split between current and non-current liability. Instead they state that this loan should just be presented as a non-current liability.
Is it because they didnt state the term of the loan as in whether its a 30 year loan or 15 year loan for example ?
It depends on whether the loan is repaid over a period at so much per year or all at the end of the period.
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