This chapter discusses a reporting entity's balance sheet presentation of debt and the related disclosures. It provides insight into how to assess certain facts and circumstances to determine whether debt should be classified as current or noncurrent at the balance sheet date. Additionally, it discusses the classification of costs incurred in issuing, modifying, and extinguishing debt in the balance sheet and the income statement, as well as the presentation of debt extinguishment gains or losses in the income statement. Finally, it discusses the balance sheet presentation of debt discounts and premiums.

For recognition and measurement considerations relevant to debt, see PwC's Financing transactions guide.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception (see FG 5) and certain aspects of the EPS guidance (see FSP 7).

For public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The one-time determination of whether an entity is eligible to be a smaller reporting company is based on an entity’s most recent determination as of August 5, 2020, in accordance with SEC regulations. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB also specified that an entity must adopt the guidance as of the beginning of its annual fiscal year and is not permitted to adopt the guidance in an interim period, other than the first interim period of their fiscal year.

Guidance in this chapter has been updated to reflect the new ASU and impacted sections are denoted with “after adoption of ASU 2020-06” and “before adoption of ASU 2020-06.”