{"id":4371,"date":"2019-08-28T17:36:00","date_gmt":"2019-08-28T17:36:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=4371"},"modified":"2026-03-27T13:25:36","modified_gmt":"2026-03-27T13:25:36","slug":"current-non-current-assets-liabilities","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/current-non-current-assets-liabilities\/","title":{"rendered":"Current and Non-current Assets &#8211; Liabilities"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Which of the following groups of assets are non-current assets?\",\n      \"answerCount\": 3,\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The correct answer is B. Goodwill and property, plant, and equipment are examples of non-current assets. A is incorrect because accrued expenses and deferred income are current liabilities. C is incorrect because long-term financial liabilities and deferred tax liabilities are non-current liabilities.\"\n      }\n    }\n  ]\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Mark\u2019s Toys has an operating cycle of 15 months. The company reported accrued labor expenses of $300,000 in its latest financial reports. The company expects to pay only two-thirds of the whole amount this year. How would the company classify the $300,000 on its balance sheet?\",\n      \"answerCount\": 3,\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The correct answer is A. The whole amount would be classified as a current liability. Operation-related expenses should be classified as current liabilities even if a company is expected not to settle them within one operating cycle or one year. Since accrued operating labor cost is an operating expense, the whole amount would be considered a current liability.\"\n      }\n    }\n  ]\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Understanding Balance Sheets (2025 Level I CFA\u00ae Exam \u2013 FRA \u2013 Module 4)\",\n  \"description\": \"This video covers the elements of the balance sheet, its uses, formats, and components, including assets, liabilities, and equity. It explains common-size balance sheets, liquidity and solvency ratios, and contrasts current and non-current items, offering insights into financial analysis and measurement bases for various assets and liabilities.\",\n  \"uploadDate\": \"2022-04-19T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/VKYuCGCea20\/default.jpg\",\n  \"contentUrl\": \"https:\/\/youtu.be\/VKYuCGCea20\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/VKYuCGCea20\",\n  \"duration\": \"PT49M29S\"\n}\n<\/script>\n\n\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/VKYuCGCea20\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>The classified balance sheet distinguishes between current and non-current assets and between current and non-current liabilities. It classifies them separately.<\/p>\n<h2><strong>Current Assets vs. Non-current Assets<\/strong><\/h2>\n<p>Current assets are assets that are primarily held for trading or which are expected to be sold, used up, or otherwise realized in cash within the greater part of a year or one business operating cycle, after the reporting period. They provide information about the operating activities and the operating capacity of a company. Examples of current assets include cash and cash equivalents, trade and other receivables, inventories, and financial assets (with short maturities).<\/p>\n<p>Non-current assets, on the other hand, are assets that are not expected to be sold or used up within the greater part of a year or one business operating cycle. These assets are oftentimes referred to as long-term or long-lived assets. They represent the infrastructure upon which a business entity operates. Investments in these assets are made from a strategic and longer-term perspective. Examples of non-current assets include property, plant and equipment, investment property, goodwill, intangible assets, and financial assets (with long maturities).<\/p>\n<h2><strong>Current Liabilities vs. Non-current Liabilities<\/strong><\/h2>\n<p>Current liabilities are liabilities that are expected to be settled within the greater part of a year or one business operating cycle, after the reporting period. To be classified as \u2018current\u2019, a liability must satisfy at least one of the following criteria:<\/p>\n<ul>\n<li>the liability is expected to be settled during the normal operating cycle of a business entity;<\/li>\n<li>the liability is held primarily for trading purposes;<\/li>\n<li>the liability is due to be settled within a year after the balance sheet date; or<\/li>\n<li>there is no unconditional right for deferral of settlement of the liability for at least a year after the balance sheet date.<\/li>\n<\/ul>\n<p>Examples of current liabilities include trade payables, financial liabilities, accrued expenses, and deferred income.<\/p>\n<p>IFRS specifies that certain current liabilities, namely trade payables and some accruals, should be considered part of the working capital used in the normal operating cycle of a business entity. As such, these operating items are classified as current liabilities irrespective of when they will be settled.<\/p>\n<p>Non-current liabilities or long-term liabilities refer to all other liabilities, including financial liabilities, which provide financing on a long-term basis. Two common examples of non-current liabilities are long-term financial liabilities and deferred tax liabilities.<\/p>\n<blockquote>\n<h3><strong>Question 1<\/strong><\/h3>\n<p>Which of the following groups of assets are non-current assets?<\/p>\n<p>A. Accrued expenses and deferred income.<\/p>\n<p>B. Goodwill and property, plant, and equipment.<\/p>\n<p>C. Long-term financial liabilities and deferred tax liabilities.<\/p>\n<p><strong>Solution.<\/strong><\/p>\n<p>The correct answer is <strong>B<\/strong>.<\/p>\n<p>Goodwill and property, plant, and equipment are examples of non-current assets.<\/p>\n<p><b>A is incorrect.<\/b> It gives examples of current liabilities.<\/p>\n<p><strong>C is incorrect.<\/strong> It gives examples of non-current liabilities.<\/p>\n<h3><strong>Question 2<\/strong><\/h3>\n<p>Mark\u2019s Toys has an operating cycle of 15 months. The company reported accrued labor expenses of $300,000 in its latest financial reports. The company expects to pay only two-thirds of the whole amount this year. How would the company classify the $300,000 on its balance sheet?<\/p>\n<ol style=\"list-style-type: upper-alpha;\">\n<li data-tadv-p=\"keep\">The whole amount would be classified as a current liability.<\/li>\n<li data-tadv-p=\"keep\">The whole amount would be classified as a non-current liability.<\/li>\n<li data-tadv-p=\"keep\">$200,000 would be classified as a current liability and $100,000, as a non-current liability.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is <strong>A<\/strong>.<\/p>\n<p>Operation-related expenses should be classified as current liabilities even if a company is expected not to settle them within one operating cycle or one year. Since accrued operating labor cost is an operating expense, the whole amount would be considered a current liability.<\/p>\n<\/blockquote>","protected":false},"excerpt":{"rendered":"<p>The classified balance sheet distinguishes between current and non-current assets and between current and non-current liabilities. It classifies them separately. Current Assets vs. Non-current Assets Current assets are assets that are primarily held for trading or which are expected to&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-4371","post","type-post","status-publish","format-standard","hentry","category-financial-reporting-and-analysis","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Current vs. Non-current Assets and Liabilities | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Assets and liabilities are classified as current or non-current based on liquidity and settlement timelines. 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