Chapter 14, Problem 1BCC

To determine

The way in which debt would be classified in the company’s balance sheet as of December 31, 2012 under U.S GAAP and IFRS both.

Given information:

In the provided case, the company named GMC having a note payable with a maturity period of 5 years. That note payable is a liability towards a larger bank and minimum cash covenants are being provided by the bank. At the end of 2013, two of the covenants were violated by the company. The rules mentioned under U.S GAAP and IFRS need to be followed for presentation and classification of those notes payable.

To determine

The rationale and thought that the FASB and IASB went through in reaching their decisions.