Reference no: EM132616200

A fellow accountant came to you for advice regarding the classification of short-term obligations repaid prior to being replaced by a long-term security. Demeter Foods issued P50,000,000 of short-term commercial paper during 2021 to finance construction of a plant in Nueva Vizcaya. At September 30, 2022, Demeter's financial year-end, the company intends to refinance the commercial paper by issuing long-term bonds to the holders of the commercial paper. However, because Demeter temporarily has excess cash, in November 2022 it liquidates P20,000,000 of the commercial paper as the paper matures. In December 2022, the company completes a P100,000,000 long-term bond issue. Later during December, it issues its September 30, 2022, financial statements. The proceeds of the long-term bond issue are to be used the P20,000,000 in working capital, to pay P30,000,000 of commercial paper as it matures in January 2023, and to pay P50,000,000 of construction costs expected to be incurred later to complete the plant. You initially are hesitant because you don't recall encountering such a situation. You also do not recall a specific IFRS pronouncement that deals with the issue. However, you are encouraged by remembering that this general topic is covered by an IASB pronouncement to which you have access: "Presentation of Financial Statements," International Accounting Standard No. 1 (London, UK: IASB, 2010)

Required:

Problem 1: Determine how the P50,000,000 of commercial paper should be classified by consulting the IASB pronouncement. Before doing so, formulate your own opinion on the proper treatment