Bonds payable that mature (or come due) within one year of the balance sheet date will be reported as a current liability if the issuer of the bonds must use a current asset or will create a current liability in order to pay the bondholders when the bonds mature.
However, the bonds could be reported as a long-term liability right up to the maturity date if:
1. The company has a sufficient, long-term investment that is restricted for the purpose of paying the bondholders when the bonds mature. This type of investment is known as a bond sinking fund.
2. The company has a binding agreement that guarantees that the existing bonds will be refinanced by issuing new bonds or by issuing shares of stock.
Learn more about Bonds Payable.
About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.
He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.
