Current Maturities of Long-Term Debt

Current liabilities are liabilities that are reasonably expected to require the use of current assets to be discharged. This means that typically current liabilities will be discharged within one year or within the operating cycle of the business, whichever is longer.¹ On the other hand, long-term liabilities are expected to be settled over several years. Because they do not represent a demand on current assets, long-term liabilities are reported separately on the balance sheet.

Many long-term liabilities require interest as well as principal payments over the life of the liability. While expected interest expenses are not a liability until they become due, the portion of the principal that the company expects to become due within the current year should be reported as a current liability. This is because that portion of the long-term liability will require the use of current assets to discharge. As a result, the current portion of serial maturities of long-term obligations and amounts required to be expended during the next year under sinking fund provisions should be reported as current liabilities.²

Reference:

1. FASB ASC 210-10-45-3
2. FASB ASC 210-10-45-9

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