Interpretation and Application of IPSAS

8 Current Assets

Current assets are key in assessing the liquidity of a public sector entity. Current assets will provide an indication of the efficiency of working capital management within the entity. IPSAS 1 stipulates that when an entity supplies goods or services within a clearly identifiable operating cycle, separate classification of current and non-current assets and liabilities on the face of the statement of financial position provides useful information by distinguishing the net assets that are continuously circulating as working capital from those used in the entity's long-term operations. It also highlights assets that are expected to be realized within the current operating cycle, and liabilities that are due for settlement within the same period (IPSAS 1.72).

Current assets include two types of asset:

• Assets (such as taxes receivable, user charges receivable, fines and regulatory fees receivable, inventories, and accrued investment revenue) that are either realized, consumed, or sold, as part of the normal operating cycle even when they are not expected to be realized within 12 months of the reporting date; and
• Assets held primarily for the purpose of trading (examples include some financial assets classified as held for trading in accordance with IPSAS 29, Financial Instruments: Recognition and Measurement) and the current portion of non-current financial assets (IPSAS 1.79).

The key current assets of any entity include inventories, receivables, and bank and ...