Current portion of long-term debt is a current liability and balance sheet account showing the aggregate principal amount of a firm’s total long-term debt (e.g., term loans, bonds and notes, finance leases and mortgages) that is due to be retired during the following accounting period. The current portion of a finance lease liability is present value of the lease payments due in one year following the balance sheet date.
| Reclassification of the Current Portion of Long-Term Debt (Example) | ||||
| OurCo has $200,000 long-term debt outstanding, $40,000 of which matures in the coming accounting period. | ||||
| 31 Dec 17 | Long-Term Debt | 40,000 | ||
| Current Portion of Long-Term Debt | 40,000 | |||
| To reclassify long-term debt maturing in the coming accounting period | ||||
A company’s current maturities are considered current liabilities unless they are to be paid from a sinking fund or other noncurrent asset source. Generally, any currently maturing obligation that is expected to be satisfied by using long-term assets or refinanced with long-term debt is to be classified as long-term debt.
Finance lease obligations is the balance sheet account that reports the present value of the discounted future lease payments plus the present value of any bargain purchase option. Each lease payment consists of a principal portion that reduces the lease obligation on the balance sheet and interest expense on the lease obligation. The noncurrent portion of lease obligations is the difference between the current portion and total lease obligations.
| Lessee Recognition of a Finance Lease (Illustration) | ||||
| Date | Leased Asset | xxx | ||
| Lease Obligation | xxx | |||
| To record a finance lease at inception | ||||
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