Question

How long of a period do Canadian companies use to distinguish between items that are current and those that are non-current?

a) 3 months
b) 6 months
c) 9 months
d) 12 months

Answer 1

Canadian companies use a 12-month period to differentiate between current and non-current items, with current items expected to be liquidated or used within one year or the operational cycle.

Step-by-step explanation:

In Canada, companies use a 12-month period to distinguish between items that are current and those that are non-current. Current items are assets and liabilities that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle of the business, whichever is longer. Non-current items, on the other hand, are those expected to be settled or utilized over a period longer than 12 months. The period used is aligned with the company's financial year and international accounting standards, which typically span a 12-month cycle.