Balance Sheet Management: The Case of ShortTerm Obligations Reclassified as LongTerm Debt Academic Article uri icon


  • We investigate potential management of balance sheet ratios by a sample of firms that reclassify short-term obligations to long-term debt and subsequently declassify that debt (return it to the current liability section). Although aggregate measures of liabilities and equity remain unchanged when firms reclassify (declassify), the practice does increase (decrease) reported measures of liquidity, such as the current ratio, and long-term leverage. Our results suggest that firms reclassify and declassify to smooth reported liquidity and leverage, relative to the prior year and to industry benchmarks. Our evidence is also consistent with firms working around restrictive debt covenants.

published proceedings

  • Journal of Accounting Research

author list (cited authors)

  • Gramlich, J. D., McAnally, M. L., & Thomas, J.

citation count

  • 25

complete list of authors

  • Gramlich, Jeffrey D||McAnally, Mary Lea||Thomas, Jacob

publication date

  • January 2001