Final answer:
Current assets and liabilities under IFRS are expected to be settled generally within one year or one operating cycle, whichever is longer. These items are essential for managing short-term obligations and effective cash flow within a company.
Step-by-step explanation:
Under the International Financial Reporting Standards (IFRS), current assets are defined as assets that are expected to be realized, or are intended for sale or consumption, within the entity's normal operating cycle; or assets held primarily for the purpose of trading within the next 12 months; or assets that are cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. Similarly, current liabilities are obligations that are expected to be settled in the entity's normal operating cycle; or liabilities held primarily for the purpose of trading; or liabilities to be settled within 12 months after the reporting period; or the entity has no unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
The time it takes to settle current assets or liabilities can therefore vary, but it is generally within one year (or one operating cycle, if longer). Companies are expected to manage their current assets and liabilities such that they can meet their short-term obligations and manage their cash flow effectively. This includes collecting receivables, selling inventory, and paying off debts and expenses that are due within this time frame.