Are available-for-sale securities current assets?
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Should available-for-sale securities always be reported as a current asset? Please explain.
What is meant by the statement, "Assets are listed in order of liquidity"? Give an example using the typical current assets section of a balance sheet.
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Solution Summary
The solution includes a discussion of available for sale securities including their value and their placement in the balance sheet. An alternative treatment to current asset is mentioned. Further discussed is the accounting procedure for any value changes such as fair market value.
The concept of the 'order of liquidty' is explaine and demonstrated with normal balance sheet line descriptions within the current asset category.
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Normally, available-for-sale securities are short-term holdings, and are classified as current assets. They could be classified as long-term, depending on the intent of management, but the current asset classification would undoubtedly be preferred (for the impact to the working capital ratio, if nothing else).
They are generally adjusted to fair market value. The other line items within the category of current assets are normally valued at fair market value too. It isn't that much of a ...
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