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Statement No. 78 Classification of Obligations That Are Callable by the Creditor-an amendment of ARB No. 43, Chapter 3A STATUS Issue Date: December 1983 Effective Date: For financial statements for fiscal years beginning after December 15, 1983 and for interim accounting periods within those fiscal years Affects: Amends ARB 43, Chapter 3A, paragraph 7 Affected by: No other pronouncements Issues Discussed by FASB Emerging Issues Task Force (EITF) Affects: No EITF Issues Interpreted by: Paragrah 5 interpreted by EITF Issues No. 86-5 and 86-30 Related Issues: No EITF Issues Abbreviations for Accounting Pronouncements FAS - FASB Statements FIN - FASB Interpretations FTB - FASB Technical Bulletins APB - APB Opinions AIN - AICPA Interpretations ARB - Accounting Research Bulletins CON - FASB ConceptsEITF - EITF Issues Q&A - FASB Implementation Guides 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: a. 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. b. 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. Copyright by Financial Accounting Standards Board. All Rights Reserved. Used by Permission.
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