Bonds payable that mature (or come due) within one year of the balance sheet date will be reported as a current liability if the issuer of the bonds must use a current asset or will create a current liability in order to pay the bondholders when the bonds mature.

However, the bonds could be reported as a long-term liability right up to the maturity date if:

  1. The company has a sufficient, long-term investment that is restricted for the purpose of paying the bondholders when the bonds mature. This type of investment is known as a bond sinking fund.

  2. The company has a binding agreement that guarantees that the existing bonds will be refinanced by issuing new bonds or by issuing shares of stock.

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