When deciding whether to report an investment among current or long-term assets,companies base their decision on their purpose or intent when holding the investment.

Question

Quizplus · Accepted Answer

This is true as per the guidelines provided by generally accepted accounting principles (GAAP). Companies consider the purpose or intent behind holding the investment to determine whether it should be classified as a current or long-term asset. For example, if the investment is held for a short period of time to generate quick profits, it would be classified as a current asset. Conversely, if the investment is held for a longer period with the intent of earning dividends or gaining value appreciation, it would be classified as a long-term asset.

When Deciding Whether to Report an Investment Among Current or Long-Term