A classified, consolidated balance sheet is prepared as of February 29, 1988, comprising the parent company's balance sheet as of that date and the subsidiary's balance sheet as of December 31, 1987. Paragraph 4 of ARB 51 permits consolidation of a parent and subsidiary whose fiscal years differ as long as "the difference is not more than about three months. " Included in the subsidiary's balance sheet is a loan payable to a bank due January 31, 1989. The amount of the loan payable is material. The issue is whether the loan payable should be classified as a current or noncurrent liability in the consolidated balance sheet. EITF DISCUSSION The Task Force was unable to reach a consensus on this issue. However, Task Force members noted that paragraph 4 of ARB 51 provides that "recognition should be given by disclosure or Copyright © 2007, Financial Accounting Standards Board Not for redistribution Page 1otherwise to the effect of intervening events which materially affect the financial position or results of operations." The SEC Observer indicated that the SEC staff would expect the debt in this case to be classified as current because to do otherwise would result in a material misclassification. STATUS This issue may be addressed in the FASB's project on the reporting entity, including consolidations and the equity method. No further EITF discussion is planned
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