Debt Classification Accounting Guidance Proposal Coming
On Wednesday, the Financial Accounting Standards Board (“FASB”) unanimously voted to issue a proposal that would help companies distinguish between debts that are due much sooner and debts that do not require payments for at least a year.
The FASB agreed to move its debt classification guidance proposal forward despite criticism from its Private Company Council and the AICPA’s Private Companies Practice Section Technical Issues Committee. Members of both organizations said the proposed changes will increase a company’s number of debts classified as “current”, thus putting their creditworthiness at risk. In addition, some private companies have previously argued that the amendments would make it more difficult for them to borrow money.
The proposal is expected to be released for public comment by early 2017, with comment letters due Friday, May 5. FASB Chairman Russell Golden said the lengthy comment period would help provide relief to private companies from tax season.