by Larry Steinberg, Senior Manager
(a) has a stated maturity of more than 12 months after the balance sheet date;
(b) is renewed after the balance sheet date, but before issuance of the current year’s financial statements, for a period that extends more than 12 months after the balance sheet date.
Under the proposed new rules, debt would be classified based on its legal status as of year-end. In other words, option (b) above would no longer allow debt to be classified as long-term. This would adversely impact working capital, which is a key factor in credit decisions by financial institutions and bonding companies, and in determining capacity ratings with state agencies.
While we don’t expect the new rules to be in effect for calendar 2017, contractors (particularly those that file prequalification applications with state highway departments) should plan on taking proactive steps before December 31, 2018 to make certain that the maturity dates of their long-term credit facilities are extended past December 31, 2019.