The current portion of long-term debt (often abbreviated as CPLTD) refers to the portion of a company’s long-term debt that is due to be repaid within the next twelve months. It represents the amount of long-term debt that will require payment or refinancing in the short term, typically within the upcoming operating cycle or fiscal year.
In This Section
- What is Current Portion of Long-Term Debt?
- Types and Examples of Current Portion of Long-Term Debt
- Current Portion of Long-Term Debt on the Balance Sheet
- Purpose of Current Portion of Long-Term Debt
- How to Record Current Portion of Long-Term Debt on Balance Sheet
- Exclusions from Current Portion of Long-Term Debt
- Frequently Asked Questions
What is Current Portion of Long Term Debt?
The current portion of long-term debt is the segment of a company’s long-term debt that is due for payment within the next 12 months. This portion is reclassified from the long-term debt category to current liabilities on the balance sheet to distinguish it from the remaining long-term debt that is due beyond the next year.
Say for example that a farm has a long-term loan of $100,000, and $10,000 of this loan is due within the next 12 months, this $10,000 will be classified as the current portion of long-term debt on the balance sheet, while the remaining $90,000 will stay classified as long-term debt.
In summary, the current portion of long-term debt is a critical component of the balance sheet that highlights the immediate debt repayment obligations, aiding in accurate financial reporting and effective management of short-term liabilities.
Types & Examples of CPLTD
Generally speaking, any amount of a long-term loan due within the coming year is considered Current Portion Long Term Debt on a balance sheet. This amount can stem from many sources.
Several examples of agricultural loans that incur current portion of long-term debt include:
- Farm Operating Loans – Short-term loans obtained to cover day-to-day operating expenses such as seed, fertilizer, feed, and labor costs during the farming season. These loans are typically repaid within one year.
- Equipment Financing – Loans taken out to purchase farm machinery, vehicles, or other equipment necessary for farm operations. These loans may have varying repayment terms depending on the type of equipment and its expected lifespan.
- Land Loans – Loans used to purchase additional land for farming expansion or to refinance existing land debt. These loans often have longer repayment terms, extending over several years or even decades.
- Livestock Financing – Loans acquired to purchase livestock or to cover expenses related to raising and maintaining livestock, such as feed, veterinary care, and transportation costs.
- Infrastructure Loans – Loans used to finance the construction or repair of farm infrastructure such as barns, irrigation systems, fencing, or storage facilities.
- Input Financing – Loans obtained to purchase inputs necessary for specific crops or livestock production, such as specialized equipment, seeds, pesticides, or fertilizers.
- Agribusiness Loans – Loans taken out for investment in related agribusiness ventures, such as processing facilities, distribution networks, or value-added product development.
Current Portion Long Term Debt on the Balance Sheet
The current portion of long term debt is an amount due that is part of a loan within the coming year. As such, current portion long term debt is always considered a current liability.
Purpose of Current Portion Long Term Debt
The current portion of long-term debt is classified as a current liability on the balance sheet because it represents an obligation that the company needs to fulfill in the near term. It is important for investors and creditors to assess the current portion of long-term debt along with other current liabilities to understand the company’s short-term financial obligations and liquidity position.
How to Record Current Portion Long Term Debt on Balance Sheet
The current portion of long-term debt (CPLTD) on a farm’s balance sheet is valued based on the amount of long-term debt that is due to be repaid within the next twelve months. This information is usually available directly from the lender that holds the debt.
In case you are interested in the details, here’s how it’s typically calculated and valued:
- Identification of CPLTD – The farm identifies the portion of its long-term debt that is due for repayment within the next twelve months. This is usually specified in the loan agreements or can be determined based on the loan’s repayment schedule.
- Valuation – The current portion of long-term debt is valued at the principal amount that is due for repayment within the next twelve months. This represents the amount of debt that the farm needs to pay off or refinance in the short term.
- Classification on Balance Sheet – The CPLTD is classified as a current liability on the farm’s balance sheet. It appears under the current liabilities section alongside other short-term obligations that are due within the next operating cycle or fiscal year.
- Disclosure – In the notes to the financial statements or accompanying footnotes, the farm may provide additional information about the current portion of long-term debt, including details about the loans, repayment terms, and any associated covenants or conditions.
- Repayment or Refinancing – As the current portion of long-term debt becomes due for repayment within the next twelve months and is paid off or refinanced, it may be reclassified on the balance sheet. Any amounts that are refinanced beyond the next twelve months would be reclassified as long-term liabilities, while the remaining portion due within the next twelve months continues to be classified as current liabilities.
Overall, the valuation of the current portion of long-term debt on a farm’s balance sheet is based on the amount of long-term debt that requires repayment within the short term, providing insight into the farm’s short-term financial obligations and liquidity position.
Exclusions from Current Portion Long Term Debt on the Balance Sheet
Common exclusions from the current portion of long-term debt (CPLTD) on the balance sheet include items that do not represent the principal portion of long-term debt due within the next 12 months.
These exclusions help ensure that CPLTD accurately reflects only the portion of long-term debt that requires repayment in the short term. Here are some typical exclusions:
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Interest Payable: The interest accrued on long-term debt is not included in CPLTD. Interest payable is listed separately under current liabilities as interest payable or accrued interest.
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Short-Term Debt: Short-term borrowings or loans that are due within one year are classified under current liabilities as short-term debt or short-term borrowings, not under CPLTD.
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Notes Payable: Short-term notes or promissory notes due within one year are classified under current liabilities as notes payable, not under CPLTD.
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Operating Lease Liabilities: Payments due within the next 12 months under operating leases are not included in CPLTD. They are listed separately, often under lease liabilities or current lease obligations.
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Accounts Payable: Obligations to suppliers for goods and services received are listed under accounts payable, not CPLTD.
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Accrued Expenses: Expenses that have been incurred but not yet paid, such as wages, utilities, and taxes, are recorded under accrued expenses or other current liabilities.
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Contingent Liabilities: Potential obligations that depend on the outcome of future events, such as lawsuits or guarantees, are disclosed in the notes to the financial statements rather than included in CPLTD.
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Taxes Payable: Income taxes and other taxes due within the next year are recorded separately under current liabilities as taxes payable.
By excluding these items, the CPLTD account on the balance sheet accurately represents only the principal portion of long-term debt that is due within the next 12 months. This clarity ensures accurate financial reporting and helps stakeholders assess the company’s short-term debt obligations and liquidity.
Frequently Asked Questions
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