The proper classification of debt is generally critical for the fair presentation of financial statements, as the nature and extent of current obligations would likely influence the economic decisions of financial statement users.  In fact, debt is a critical element in many important financial statement ratios, such as those related to liquidity and leverage.  Unfortunately, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) guidance related to the classification of debt can be complex in some situations, based on application of narrow authoritative rules and fact patterns.

This course covers the proper treatment and resolution of the most common debt classification and disclosure issues faced by entities financed by long-term debt arrangements.

 

 

 

Course Series

This course is included in the following series:

6 CoursesAn Auditor's Perspective on...

  1. Preparing Financial Statements - An Auditor’s Perspective on What Matters Most
  2. Independence Rules for CPA’s - An Auditor’s Perspective on Significant AICPA, Public Company, Governmental, and International Differences
  3. Designing and Performing Sampling Plans – An Auditor’s Perspective on Monitoring Internal Controls, Compliance, and the Reasonableness of Account Balances
  4. FASB ASC Section 205-40: Going Concern Uncertainty – An Auditor’s Perspective
  5. FASB ASC Topic 470: Debt – An Auditor’s Perspective on Common Balance Sheet Classification Issues
  6. FASB ASC Topic 820 Fair Value – An Auditor’s Perspective on Determining Fair Value of Non-Readily Marketable Investments
Learning Objectives
  • Discover how to properly classify various debt obligations between current and long-term based on the nature and terms of the financing arrangement.
  • Discover the factors that influence presentation, such as debt due on demand, callable debt, subjective acceleration clauses, compliance with debt covenants, revolving credit arrangements, and short-term debt in the process of being refinanced.
  • Explore the required elements of a properly worded waiver letter, which would allow debt to continue to be classified as long-term, despite debt covenant violations that make the debt callable by the creditor.  
Last updated/reviewed: August 5, 2023
15 Reviews (74 ratings)

Reviews

3
Anonymous Author
Overall ok. The course focuses on "how certain debt is classified. There is not enough focus on explaining why under certain circumstances debt is classified as current or non-current. For instance, if the lockbox proceeds are automatically used to pay down debt, why would it be classified as current? Isn't this counter-intuitive?
5
Anonymous Author
The course gave a nice pictureof debt and its relationship with other balance sheet items, as aslo the impact of classification of debt on debt covenants, financing arrangements, etc. Excellent.
4
Member's Profile
Good basic course on debt classification. The instructor can be hard to follow at times and the presentation could use some illustrations or examples to help engage the attendees.
4
Anonymous Author
Course offers a great insight on debt balance sheet classification issues that will also be useful for those preparing financial statements.
5
Anonymous Author
great course.................illumeo, quit telling my reviews are not long enough. i paid for cpe, i did not pay to be forced to review.
5
Member's Profile
Well-organized. I'm surprised at how much I don't know about debt. Useful course for anyone teaching auditing.
4
Anonymous Author
This is a helpful session but wish the slides were written better for future reference. It's a bit confusing.
5
Anonymous Author
Well organized presentation of the various circumstances that affect how debt is classified.
5
Member's Profile
Very detailed but good summaries provided in chart form that would make them easy to use.
4
Anonymous Author
This is a difficult course for those trained with IFRS standards.
5
Anonymous Author
Course raised awareness of various debt arrangements available.
5
Member's Profile
Great distillation of a possibly complex topic.
5
Member's Profile
Good course and good instruction
5
Member's Profile
Very clearly explained.
4
Member's Profile
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Prerequisites
Course Complexity: Advanced

No advanced preparation or prerequisites are required for this course.

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
  Course Overview CPE
Course Syllabus
INTRODUCTION and OVERVIEW
  Introduction to FASB ASC Topic 4703:02
FASB ASC Topic 470
  Importance of Proper Debt Classification 5:11
  Due on Demand and Subjective Acceleration Clauses 5:01
  Callable Debt with Covenants 12:04
  Auditor's Response When Debt Covenant Violated 3:35
  Short -Term Debt Being Refinanced 11:52
  Revolving Credit Arrangements 10:07
CONCLUSION
  Default Debt Instruments 5:19
Continuous Play
  FASB ASC Topic 470 56:10
SUPPORTING MATERIALS
  Slides: FASB ASC Topic 470PDF
  FASB ASC Topic 470 Glossary/IndexPDF
REVIEW and TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam