CMA Intermediate · Corporate Accounting and Auditing · Presentation of Financial Statements (Ind AS 1)

According to Ind AS 1, why is separate classification of current and non-current assets and liabilities considered useful for an entity that supplies goods or services within a clearly identifiable operating cycle?

Separate classification distinguishes net assets continuously circulating as working capital from those used in long-term operations. It also highlights assets expected to be realised, and liabilities due for settlement, within the current operating cycle, which is useful information for users.

1. AIt guarantees that all liabilities are shown at fair value
2. BIt distinguishes net assets continuously circulating as working capital from those used in long-term operations, and highlights assets to be realised and liabilities due for settlement within the operating cycleCorrect
3. CIt removes the need to disclose any information about timing of settlement
4. DIt allows deferred tax balances to be shown as current items