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Abstract
The FASB's proposal is intended to simplify the rules that determine whether debt should be classified as current or noncurrent. If finalized as proposed, the new guidance on debt classification would replace the current hodgepodge of rules based on varying criteria with a principle based on the debt's legal terms. The proposal could affect companies that present a classified balance sheet (i.e. current assets and liabilities separated from long-term assets and liabilities). Some believe that more debt will be classified as current if the standard is finalized as proposed. The FASB received 29 comment letters on its proposal. Most of the comments were from audit firms and professional organizations of accountants. This proposal was issued as part of the FASB's ongoing Simplification Initiative. Created in 2014, the initiative is a response to concerns that GAAP has become unnecessarily complex. As part of its initiative, the FASB is targeting specific, narrow issues that could reduce the cost and complexity of existing rules without diminishing the usefulness of the financial statements.