The IMA Financial Reporting Committee and Small Business Committee (Committees) issued a joint comment letter in response to the FASB’s exposure draft, Proposed ASU No. 2019-780, Debt (Topic 470): Simplifying the Classified Balance Sheet (Current versus Noncurrent), Revision of Exposure Draft. This proposed guidance, if adopted, would modify the criteria that an entity applies to determine whether to classify outstanding debt obligations as short-term or long-term.

In their comment letter, the Committees note that although they support the FASB’s simplification initiatives regarding debt classification, they believe that this proposed guidance insufficiently addresses the complexities in debt instruments. The Committees note, for example, that many debt instruments include contingent puts and calls, variable cash flow provisions, and installment-based prepayment terms. In their view, the proposed guidance, if adopted as exposed, would raise application challenges, and it would be beneficial for the FASB to clarify or revise several items in the draft guidance.