Assets to be sold, consumed or realized as part of the normal operating cycle are

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Chapter 10 - Statement of Financial Position

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Chapter 10- Statement of Financial Position

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Para 4.8 of Guidance Note on Division III of Schedule III needs change

Paragraph 4.8 of the Guidance Note on Division III of Schedule III to the Companies Act, 2013 issued by the Institute of Chartered Accountants of India is misleading as it misleads its readers to understand that the requirement of paragraph 61 of Ind AS 1, Presentation of Financial Statements, to disclose assets recoverable more than 12 months after the end of the reporting period as disclosure of non-current asset. It may be noted that paragraph 66 of Ind AS 1 defines current asset as under:

"An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting period; or
(d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current."

Further, paragraph 68 of Ind AS 1 clarifies as under:

"Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period."

Paragraph 4.8 of the Guidance Note on Division III of Schedule III misleads a reader to understand that the disclosure of more than 12 months means non-current. The classification on current / non-current is more from the perspective of operating cycle than 12 months. 12 months is only one of the criteria to classify as current / non-current. However, current assets may include assets recoverable after more than 12 months. For example, inventories / receivables recoverable after more than 12 months are current assets. Therefore, to provide information to users on assets that are recoverable more than 12 months, paragraph 61 requirement has been included in Ind AS 1. Thus, the disclosure of more than 12 months required by para 61 of Ind AS 1 is more for assets that are considered current though recoverable more than 12 months than any other assets than for non-currrent assets.

Current assets means cash or other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.

2.Assets to be sold, consumed or realized as part of the normal operating cycle area. Current assetsb. Noncurrent assetsc. Classified as current or noncurrent in accordance with other criteriad. Noncurrent investments3.Liabilities that an entity expects to settle within the normal operating cycle are classifiedasa. Noncurrent liabilitiesb. Current or noncurrent liabilities in accordance with other criteriac. Current liabilitiesd. Equity4.In which section of the statement of financial position should cash that is restricted forthe settlement of a liability due 18 months after the reporting period be presented?a. Current assetsb. Equityc. Noncurrent liabilitiesd. Noncurrent assets5.In which section of the statement of financial position should employment taxes that aredue for settlement in 15 months' time be presented?a.Current liabilitiesb.Current assetsc.Noncurrent liabilitiesd.Noncurrent assets6.An entity has a loan due for repayment in six months' time, butthe entity has the optionto refinance for repayment two years later. The entity plans to refinance this loan. Inwhich section of the statement of financial position should this loan be presented?a.Current liabilitiesb.Current assetsc.Noncurrent liabilitiesd.Noncurrent assets7.Which of the following must be included on the face of the statement of financialposition?

a.Investment propertyb.Number of shares authorizedc.Contingent assetd.Shares in an entity owned by that entity8.Which of the following isnotrequired to be presented as minimum information on theface of the statement of financial position?a.Investment propertyb.Investment accounted under the equity methodc.Biological assetd.Contingent liability9.Which of the following must be includedas aline itemin the statement of financialposition?a.Contingent assetb.Property, plant, and equipment analyzed by classc.Share capital and reserves analyzed by classd.Deferred tax asset10. Which statement about the statement of financial position isnottrue?a.Biological assets should be reported in the statement of financial position.b.The number of shares authorized for issue should be reported in the statement offinancial position or the statement of changes in equity or in the notes.c.Provisions should be recognized in the statement of financial position.d.A revaluation surplus on a noncurrent asset in the current year should berecognized in the income statement.

QUESTION 10-17 Multiple choice (AICPA Adapted

Are assets to be sold consumed or realized as part of the normal oprating cycle?

Which of the following assets is expected to be realized sold or consumed within one year?

Which activities are part of the operating cycle?

What are considered operating current assets?