Generally Accepted Accounting Principles
in the United States

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Short-Term Obligations
Expected to Be Refinanced
(SFAS No. 6)

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SFAS No. 6


Statement of Financial Accounting Standards (SFAS) No. 6
        a.  Classification of Short-Term Obligations Expected to Be Refinanced
        b.  Issued in May 1975


SFAS No. 6

 Debts to be refinanced
            are excluded from current liabilities
            only if both of the following conditions are met:

            a.  Company intends to refinance the obligation on a long-term basis.
            b.  Company has the ability to refinance.

 Company has the ability to refinance
            can be supported by one of the following:

            a.  Issuance of long-term debt (or equity securities)
                 after the balance sheet date
                 but before the balance sheet is issued.

            b.  Financing agreement
                 (to refinance short-term debt on a long-term basis)
                 before the balance sheet is issued.

 Financing agreement should satisfy all of the following:
            a.  Within one year (or operating cycle)
                 from balance sheet date
                 --> agreement doe not expire
                 --> agreement is not cancelable by lender

            b.  No violation of provisions
                 --> at the balance sheet date and
                 --> during the period between the balance sheet date and
                       the date balance sheet is issued.

            c.  Lender is financially capable of honoring the agreement.


ARB No. 43, Chapter 3A
     Section A:  Current assets and current liabilities

             Current assets
                 --> assets that are reasonably expected
                       to be realized in cash (or sold or consumed)
                       within one-year or normal operating cycle,
                       whichever is longer.
                      
             Current liabilities
                 --> obligations that are reasonably expected
                       to be liquidated
                       within one-year or normal operating cycle,
                       whichever is longer.

             Funds to be used to pay debts
                 --> Funds to be used for liquidation of long-term debts are
                       excluded from current assets.

                 --> Funds to be used for liquidation of current liabilities are
                       reported as current assets.

             Current liabilities do NOT include:
                 --> debts to be liquidated by funds
                       not classified as current assets.
  








 
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