Question:
Explain the difference(s) between investments in equity securities classified as current assets versus those
classified as noncurrent assets.
Answer:
Investments in equity securities are classified as current if the company’s management (1) intends to
liquidate the investment in the next year or operating cycle, whichever is longer, and (2) has the ability to
do so, that is, the investment is marketable. If either of these criteria does not hold, the investment is
classified as noncurrent.
Explain the difference(s) between investments in equity securities classified as current assets versus those
classified as noncurrent assets.
Answer:
Investments in equity securities are classified as current if the company’s management (1) intends to
liquidate the investment in the next year or operating cycle, whichever is longer, and (2) has the ability to
do so, that is, the investment is marketable. If either of these criteria does not hold, the investment is
classified as noncurrent.
