Other Current Borrowings
A detailed guide to the catch-all category for miscellaneous short-term, interest-bearing debt on a company's balance sheet.
Other current borrowings is a label on the balance sheet (under current liabilities) that aggregates short-term borrowing obligations which don’t fit into more specific categories. In simple terms, it covers short-term borrowings that are not otherwise classified. These are debts or financing arrangements the company must repay within the next year, but which are not labeled as standard short-term loans or trade payables. By grouping them under “other current borrowings,” companies can present a clear total of miscellaneous short-term debt-like obligations in one line.
Typical Components of Other Current Borrowings
This line item can include a variety of short-term obligations. Common examples are:
- Bank Overdrafts and Credit Lines: Overdrawn bank accounts or usage of revolving credit facilities that function as short-term loans.
- Short-Term Bank Loans or Commercial Paper: Any interest-bearing loans due within 12 months that are not large enough to warrant their own line item.
- Accrued Interest on Borrowings: Some companies, particularly under IFRS, include interest accrued but not yet paid on loans in this line.
- Miscellaneous Financial Liabilities: Any other short-term obligations that behave like debt, such as notes payable to non-trade vendors or dues under specific financing agreements.
Differences from Other Liabilities
vs. Short-Term Loans
A line explicitly titled 'Short-Term Loans' usually refers to major, formal debt agreements. 'Other Current Borrowings' is often a catch-all for smaller or more miscellaneous short-term debt obligations. Both are interest-bearing liabilities.
vs. Accounts Payable
Accounts Payable (AP) is an operating liability owed to suppliers for goods and services, and it is typically non-interest-bearing. Other Current Borrowings are a financing liability representing money the company has borrowed, which typically involves interest.
How 'Other Current Borrowings' Are Treated in Financial Analysis
Analysts pay close attention to this item because it is part of the company’s short-term debt and impacts liquidity:
- Liquidity and Current Ratio: These borrowings increase current liabilities and can weaken the Current Ratio ($$\frac{\text{Current Assets}}{\text{Current Liabilities}}$$), signaling lower short-term liquidity if the balance grows significantly.
- Debt and Leverage: They are included in total debt calculations for leverage ratios like Debt-to-Equity. A large reliance on short-term borrowings can indicate refinancing risk.
- Interest and Cash Flow Impact: Since these borrowings usually incur interest, they affect interest expense. Changes in this line item also appear in the Cash Flow from Financing Activities section of the cash flow statement, revealing if a company is borrowing to meet cash needs.
IFRS vs. US GAAP: Terminology and Treatment
Both IFRS and US GAAP require short-term obligations to be shown as current liabilities, but terminology and presentation can differ:
- Terminology: Under IFRS, companies commonly use the term 'borrowings', and 'other current borrowings' is a frequent line item. Under US GAAP, terms like 'short-term debt' or 'notes payable (current)' are more common.
- Inclusion of Interest Payable: It's more common in IFRS financials for accrued interest on loans to be included in the borrowings line itself. In US GAAP, accrued interest is often listed separately under 'accrued expenses'.
- Bank Overdrafts: IFRS may allow bank overdrafts that are part of cash management to be presented as negative cash. US GAAP generally requires them to be shown as a liability.
Illustrative Examples
EssilorLuxottica (IFRS)
Gestamp AutomociĂłn (IFRS)
Oracle (US GAAP)
Key Takeaways
Other Current Borrowings is a catch-all balance sheet category for short-term, interest-bearing financial obligations that are not significant enough to be listed separately.
It is distinct from Accounts Payable, which is an operating liability, whereas 'borrowings' arise from financing activities.
Common components include bank overdrafts, smaller short-term loans, commercial paper, and sometimes accrued interest on debt.
This line item is a component of Total Current Liabilities and Total Debt, and is critical for analyzing a company's short-term liquidity and overall leverage.
Presentation and terminology can differ between IFRS and US GAAP, but in all cases, analysts should check the footnotes to understand the specific composition of this category.
Other Current Borrowings
A detailed guide to the catch-all category for miscellaneous short-term, interest-bearing debt on a company's balance sheet.
Other current borrowings is a label on the balance sheet (under current liabilities) that aggregates short-term borrowing obligations which don’t fit into more specific categories. In simple terms, it covers short-term borrowings that are not otherwise classified. These are debts or financing arrangements the company must repay within the next year, but which are not labeled as standard short-term loans or trade payables. By grouping them under “other current borrowings,” companies can present a clear total of miscellaneous short-term debt-like obligations in one line.
Table of Contents
Typical Components of Other Current Borrowings
This line item can include a variety of short-term obligations. Common examples are:
- Bank Overdrafts and Credit Lines: Overdrawn bank accounts or usage of revolving credit facilities that function as short-term loans.
- Short-Term Bank Loans or Commercial Paper: Any interest-bearing loans due within 12 months that are not large enough to warrant their own line item.
- Accrued Interest on Borrowings: Some companies, particularly under IFRS, include interest accrued but not yet paid on loans in this line.
- Miscellaneous Financial Liabilities: Any other short-term obligations that behave like debt, such as notes payable to non-trade vendors or dues under specific financing agreements.
Differences from Other Liabilities
vs. Short-Term Loans
A line explicitly titled 'Short-Term Loans' usually refers to major, formal debt agreements. 'Other Current Borrowings' is often a catch-all for smaller or more miscellaneous short-term debt obligations. Both are interest-bearing liabilities.
vs. Accounts Payable
Accounts Payable (AP) is an operating liability owed to suppliers for goods and services, and it is typically non-interest-bearing. Other Current Borrowings are a financing liability representing money the company has borrowed, which typically involves interest.
How 'Other Current Borrowings' Are Treated in Financial Analysis
Analysts pay close attention to this item because it is part of the company’s short-term debt and impacts liquidity:
- Liquidity and Current Ratio: These borrowings increase current liabilities and can weaken the Current Ratio ($$\frac{\text{Current Assets}}{\text{Current Liabilities}}$$), signaling lower short-term liquidity if the balance grows significantly.
- Debt and Leverage: They are included in total debt calculations for leverage ratios like Debt-to-Equity. A large reliance on short-term borrowings can indicate refinancing risk.
- Interest and Cash Flow Impact: Since these borrowings usually incur interest, they affect interest expense. Changes in this line item also appear in the Cash Flow from Financing Activities section of the cash flow statement, revealing if a company is borrowing to meet cash needs.
IFRS vs. US GAAP: Terminology and Treatment
Both IFRS and US GAAP require short-term obligations to be shown as current liabilities, but terminology and presentation can differ:
- Terminology: Under IFRS, companies commonly use the term 'borrowings', and 'other current borrowings' is a frequent line item. Under US GAAP, terms like 'short-term debt' or 'notes payable (current)' are more common.
- Inclusion of Interest Payable: It's more common in IFRS financials for accrued interest on loans to be included in the borrowings line itself. In US GAAP, accrued interest is often listed separately under 'accrued expenses'.
- Bank Overdrafts: IFRS may allow bank overdrafts that are part of cash management to be presented as negative cash. US GAAP generally requires them to be shown as a liability.
Illustrative Examples
EssilorLuxottica (IFRS)
Gestamp AutomociĂłn (IFRS)
Oracle (US GAAP)
Key Takeaways
Other Current Borrowings is a catch-all balance sheet category for short-term, interest-bearing financial obligations that are not significant enough to be listed separately.
It is distinct from Accounts Payable, which is an operating liability, whereas 'borrowings' arise from financing activities.
Common components include bank overdrafts, smaller short-term loans, commercial paper, and sometimes accrued interest on debt.
This line item is a component of Total Current Liabilities and Total Debt, and is critical for analyzing a company's short-term liquidity and overall leverage.
Presentation and terminology can differ between IFRS and US GAAP, but in all cases, analysts should check the footnotes to understand the specific composition of this category.
Related Terms
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