Summary of Statement No. 78
Classification of Obligations That Are Callable by the
Creditor--an amendment of ARB No. 43, Chapter
3A< (Issued 12/83)
Summary
This Statement amends ARB No. 43, Chapter 3A, "Current Assets and
Current Liabilities," to specify the balance sheet classification
of obligations that, by their terms, are or will be due on demand
within one year (or operating cycle, if longer) from the balance
sheet date. It also specifies the classification of long-term
obligations that are or will be callable by the creditor either
because the debtor's violation of a provision of the debt agreement
at the balance sheet date makes the obligation callable or because
the violation, if not cured within a specified grace period, will
make the obligation callable. Such callable obligations are to be
classified as current liabilities unless one of the following
conditions is met:
- The creditor has waived or subsequently lost the right to
demand repayment for more than one year (or operating cycle, if
longer) from the balance sheet date.
- For long-term obligations containing a grace period within
which the debtor may cure the violation, it is probable that the
violation will be cured within that period, thus preventing the
obligation from becoming callable.
Short-term obligations expected to be refinanced on a
long-term basis, including those callable obligations discussed
herein, continue to be classified in accordance with FASB Statement
No. 6, Classification of Short-Term Obligations Expected to Be
Refinanced. This Statement is effective for financial
statements for fiscal years beginning after December 15, 1983 and
for interim periods within those fiscal years.
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