Chapter 2 - Statement of Financial Position

The operating cycle of entity

Is the time between the acquisition of materials entering into process and their realization in cash.

Under Philippine jurisdiction, the common practice is to present in the statement of financial position

Current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities

When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as

Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach

A presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current and noncurrent presentation for

Financial institution

When there is much variability the operating cycle is measured at

twelve months

Current and noncurrent presentation of assets and liabilities provides useful information when the entity

Supplies goods and services within a clearly identifiable operating cycle

An entity shall classify an asset as current under all of the following conditions, except

The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after the reporting period.

An entity shall classify a liability as current under all of the following conditions, except

The entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period

Which obligations are classified as current even if these are due to be settled after more than twelve months from the end of the reporting period?

Trade payables and accruals for employee and other operating cost

A financial liability due within twelve months after the reporting period shall be classified as noncurrent

When it is refinanced on a long-term basis on or before the end of the reporting period