Question

How long of a period do Canadian companies use to distinguish between items that are current and those that are non-current

Answer 1

Canadian companies use a one-year period to separate current from non-current items on their balance sheets, distinguishing assets and liabilities based on their expected conversion to cash or settlement within or beyond this timeframe.

Step-by-step explanation:

Canadian companies typically use a period of one year to distinguish between current and non-current items on their balance sheets. Current assets or liabilities are those expected to be sold, consumed, or settled within 12 months from the reporting date. Conversely, non-current assets or liabilities are ones that are expected to remain on the balance sheet for longer than this one-year period.

Answer 2

Canadian companies typically classify items as current if they are expected to be liquidated, consumed, or sold within one year or the normal operating cycle, whichever is longer. Items not meeting this criterion are classified as non-current, indicating they are expected to be held or used for periods longer than one year or the operating cycle.

Step-by-step explanation:

In Canadian companies, current items are typically those that are expected to be sold, consumed, or exhausted through normal business operations within one year, or within the normal operating cycle of the business, whichever is longer. Conversely, non-current items are those that are expected to be converted into cash, consumed, or sold beyond the period of one year or the operating cycle.

For instance, current assets may include cash, inventories, and accounts receivable that the company expects to turn into cash within the year. Current liabilities might consist of accounts payable and other obligations due within the same timeframe. On the other hand, non-current assets might consist of long-term investments, property, plant, and equipment, and non-current liabilities could involve long-term debt obligations.

The distinction between current and non-current items is crucial when analyzing a company's balance sheet, as it helps in understanding the liquidity position and financial health of the company.