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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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