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Current Maturities of Long-Term Debt

Moneyzine Editor
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Moneyzine Editor
1 mins
January 12th, 2024
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Current Maturities of Long-Term Debt

Definition

The term current maturities of long-term debt refers to the portion of a company's liabilities that are coming due in the next 12 months. Examples of this long-term debt include bonds as well as mortgage obligations that are maturing. This portion of long-term debt is classified as a current liability on a company's balance sheet.

Explanation

Current liabilities are defined as debts that must be paid within one year or one operating cycle, whichever is longer. The current maturities of long-term debt is also part of the company's definitely determinable liabilities, since it's both known to exist and can be measured precisely.

As these debt obligations come due in the next 12 months, they are moved from the long-term liabilities section of the balance sheet to current liabilities. There are three exceptions to this guideline. If one of the following conditions exists, the debt should not be moved to the current liabilities section of the balance sheet:

  • If the company has established an asset (fund) to retire this debt, and that fund is not classified as a current asset.

  • If the long-term debt coming due is going to be refinanced or retired using new debt.

  • If the maturing portion of the long-term debt is going to be converted into shares of common or preferred stock.

Furthermore, companies are required to add a parenthetical explanation or footnote to the company's financial statements when they plan to liquidate debt in this manner.

Related Terms

  • Current Liabilities
    The financial accounting term current liabilities are generally defined as any debts that must be paid within one year or one operating cycle, whichever is longer. Current liabilities are a subcategory of liabilities, which appear on a company's balance sheet.
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  • Long-Term Debt
    The financial accounting term long term debt is defined as the loans and other debt obligations of a business that are payable in twelve months or longer. Long term debt appears in the liabilities section of a company's balance sheet.
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  • Current Assets
    The financial accounting term current assets is generally defined as cash and other assets that can be converted into cash within one year or one operating cycle, whichever is longer. Current assets are a subcategory of assets, which appear on a company's balance sheet.
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  • The financial accounting term parenthetical explanation refers to an approach to disclosing information appearing in financial statements. Parenthetical explanations are needed on a company's balance sheet when additional precision or completeness is required.
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  • Financial Statements
    The accounting term financial statement refers to a series of documents that reflect the collection and summary of accounting data. Financial statements include the balance sheet, income statement, cash flow statement, and the statement of retained earnings.
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  • Determinable Current Liabilities
    The financial accounting term determinable current liabilities refers to near-term debt obligations that can be precisely measured. To qualify as a determinable current liability, the debt obligation is reasonably expected to come due in a single operating cycle or one year. There must also be certainty about the existence of the obligation, as well as the amount owed.
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