Inventory Held For More Than One Year?
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.
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