Inventory Held For More Than One Year?

by Huykheng
(Cambodia)

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Q: Every company assumes that their inventory is a current asset as its term is less than one year. What do you do with inventory which you expect to sell beyond one year's time?


A:
Very good question.

The rule is that
inventory one expects to hold for at least one year are classified as non-current assets.

For example, an investment firm trades in investments (investments in other companies). Its inventory - the items it buys and sells - are investments. These investments (if the company intended and expected to sell them within a year) would be classified as
inventory under current assets .

However, if the company also had investments that it expected to hold onto for at least one year, these would be classified under
non-current assets .

The same would apply to any inventory (assets that the business traded) that they expected to sell after one year.

Comments for Inventory Held For More Than One Year?

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See TPA 2140.13
by: Anonymous

The above TPA covers this question - under US GAAP if it will take more than the normal operating cycle to sell, the inventory should be a long-term asset. See also ASC 310-10-45-9

Sorry, but...
by: Anonymous

Are we talking about IFRS? Because if so, inventory is always a current asset. I agree that a current asset is expected to be realised in one year, but also an asset that is expected to be realised "within the operating cycle" is a current asset, no matter how long is this operating cycle. Current assets include assets that are primarily held for the purpose of trading.

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