91Ó°ÊÓ

Current liabilities are the liabilities payable within an accounting year. These are created out of realization from current assets or by creating fresh current liability (obligation).

A firm is required to exclude a short-term obligation from current liabilities if it aims to refinance the obligation on a long-term basis and:

1. The firm can show the ability to consummate the refinancing.
2. The obligation is not considered as a part of normal operations.
3. It can demonstrate that there will be a negative effect on working capital if it is not further classified.
4. The interest rate on the long-term obligation is below the prime rate.

Thus, these are conditions that suggest that the short-term be excluded from current liabilities.