Other liabilities whose regular and ordinary liquidation is expected to occur within a relatively short period of time, usually 12 months, are also generally included, such as the following:
a. Short-term debts arising from the acquisition of capital assets.
b. Serial maturities of long-term obligations.
c. Amounts required to be expended within one year under sinking fund provisions.
d. Agency obligations arising from the collection or acceptance of cash or other assets for the account of third persons. Loans accompanied by pledge of life insurance policies would be classified as current liabilities if, by their terms or by intent, they are to be repaid within 12 months. The pledging of life insurance policies does not affect the classification of the asset any more than does the pledging of receivables, inventories, realestate, or other assets as collateral for a short-term loan. However, when a loan on a life insurance policy is obtained from the insurance entity with the intent that it will not be paid but will be liquidated by deduction from the proceeds of the policy upon maturity or cancellation, the obligation shall be excluded from current liabilities.
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 non current assets, or are segregated for the liquidation of long-term debts. Even though not actually set aside inspecial accounts, funds that are clearly to be used in the near future forthe 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 months.
d. Cash surrender value of life insurance policies.
e. Land and other natural resources.
f. Depreciable assets.
g. Long-term pre payments that are fairly chargeable to the operations of several years, or deferred charges such as bonus payments under a long-term lease, costs of rearrangement of factory layout or removal to a new location.
Notes or accounts receivable from officers, employees, or affiliated entities must be shown separately and not included under a general heading such as notes receivable or accounts receivable.
The following are examples of non recognized subsequent events-
a. Sale of a bond or capital stock issued after the balance sheet date but before financial statements are issued or are available to be issued.
b. A business combination that occurs after the balance sheet date but before financial statements are issued or are available to be.
c. Settlement of litigation when the event giving rise to the claim took place after the balance sheet date but before financial statements are issued or are available to be issued.