UITF Abstract 4
Presentation of long-term debtors in current assets
The issue
1
Both for liabilities and for debtors the Companies Act requires a distinction to be
drawn between the amounts payable or receivable within one year and those due to be
settled or received after more than one year. Although the distinction is disclosed in
the notes for each of the items forming part of debtors, (including prepayments and
accrued income if included in debtors), unlike in the case of liabilities it is not
required to be carried through to the total of current assets nor to the significant
Format 1 sub-total of net current assets (liabilities).
2
In consequence, there is a certain imbalance between the items that the formats
require to be classified under current assets or current liabilities. For example, a
pension fund surplus (to the extent recognised in the balance sheet) could give rise to
a prepayment forming part of net current assets (liabilities), whereas a deficiency
would normally be shown as a provision under long-term liabilities. In some cases the
period expected to be required for recovery of such an asset may be considerable,
perhaps in excess of ten years. Other examples of long-term debtor items include
much of the trade debtors of lessors and deferred consideration in respect of the sale
of an investment or other fixed asset.
Application to smaller entities
2A
Reporting entities applying the Financial Reporting Standard for Smaller Entities
currently applicable are exempt from this Abstract.
UITF consensus
3
In most cases it will be satisfactory to disclose the size of debtors due after more than
one year in the notes to the accounts. There will be some instances, however, where
the amount is so material in the context of the total net current assets that in the
absence of disclosure of debtors due after more than one year on the face of the
balance sheet readers may misinterpret the accounts. The Task Force have agreed
that, in such circumstances, the amount should be disclosed on the face of the balance
sheet.
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Date from which effective
4
The disclosure required by this consensus should be adopted in financial statements
relating to accounting periods ending on or after 23 August 1992, but earlier adoption
is encouraged.
References
Legislation
Great Britain and Northern Ireland
Companies Act 1985 and Companies (Northern Ireland) Order 1986 - Schedule 4 Balance
Sheet Formats 1 and 2 including notes 5 and 6
Republic of Ireland
Companies (Amendment) Act 1986, the Schedule, Balance Sheet Formats 1 and 2 including
note 4
Accounting standards
SSAP 21, ‘Accounting for leases and hire purchase contracts’
SSAP 24, ‘Accounting for pension costs’
International Accounting Standard 13, ‘Presentation of Current Assets and Current
Liabilities’:
EDITORIAL NOTE: NOT PART OF THE ABSTRACT
Date of publication and subsequent amendments
UITF Abstract 4 was issued on 22 July 1992.
Paragraph 2A was inserted by the Financial Reporting Standard for Smaller Entities
(FRSSE), issued November 1997, and amended by the FRSSE (effective march 1999) in
December 1998.
IAS 13, ‘Presentation of Current Assets and Current Liabilities’ was replaced by IAS 1
(Revised) ‘Presentation of Financial Statements’, issued August 1997.
END OF EDITORIAL NOTE
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