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Short Term vs Long Term Debt

We are a privately held company whose bank requires audits and whose finanacial statements are primarily for the bank. We have several loans with our bank that we have just refinanced. We have prescribed payments per the loan agreements. We are currently paying more than these payments as we have the cash available. For presentation purposes on our financials, I would calculate the shore term portion of the debt based on the required payments by the bank until I reach the last year of the loan where everything left owing is short term and then recalibrate these to what is actually owed. Is this the correct way to handle this? Has anyone done anything different?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Without researching the GAAP, it sounds reasonable.

If, as you say you only provide these reports to the bank, and you have an Auditor, ask them (either/both).

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I am confused and concerned on your use of the term "recalibrate".

Here is my take.....I think you are over analyzing it. Your debt presentation is what is the required schedule of payments to the bank (principal --> short term up to 1 year and long term 1+ yrs) . Whether you are or can pay more than the required principal payment is irrelevant. Excess principal payments should come out of the short term (if you initially broke this down to short/long terms) portion first...then from the long term portion. This way there is no need to "recalibrate" near the end of the loan term.

John Herndon
Title: Senior Consultant
Company: NOWCFO
(Senior Consultant, NOWCFO) |

You do not classify debt in either LT or ST based on payments, you base it on the portion coming due within the year as ST...all other amounts as LT.

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