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Prepaid expenses are not current assets in the sense that they will be converted into cash
but in the sense that, if not paid in advance, they would require the use of current assets during the
. An asset representing the overfunded status of a single-employer defined benefit
pension or postretirement plan shall be classified pursuant to Subtopics 715-30 and 715-60.
A one-year time period shall be used as a basis for the segregation of current assets in
cases where there are several operating cycles occurring within a year. However, if the period of the
operating cycle is more than 12 months, as in, for instance, the tobacco, distillery, and lumber
businesses, the longer period shall be used. If a particular entity has no clearly defined operating cycle,
the one-year rule shall govern.
The concept of the nature of current assets contemplates the exclusion from that
classification of such resources as the following:
a. Cash and claims to cash that are restricted as to withdrawal or use for other than current
operations, are designated for expenditure in the acquisition or construction of noncurrent
assets, or are segregated for the liquidation of long-term debts. Even though not actually set
aside in special accounts, funds that are clearly to be used in the near future for the
liquidation of long-term debts, payments to sinking funds, or for similar purposes shall also,
under this concept, be excluded from current assets. However, if such funds are considered
to offset maturing debt that has properly been set up as a current liability, they may be
included within the current asset classification.
b. Investments in securities (whether marketable or not) or advances that have been made for
the purposes of control, affiliation, or other continuing business advantage.
c. Receivables arising from unusual transactions (such as the sale of capital assets, or loans or
advances to affiliates, officers, or employees) that are not expected to be collected within 12
d. Cash surrender value of life insurance policies.
e. Land and other natural resources.
f. Depreciable assets.