Analyzing the Reclassification of Debt General Mills is a multibillion dollar company that makes and sells products used in the kitchens of most American homes. The Company’s annual report included the following note:
We have a revolving credit agreement expiring in two years that provides for a credit line (which permits us to borrow money when needed). This agreement provides us with the opportunity to refinance short term borrowings on a long term basis. Should General Mills classify the short term borrowings as current or noncurrent debt based on this ability to borrow money to refinance the debt if needed? If you were a member of the management team, explain what you would want to do and why. If you were a financial analyst, would your answer be different?