FAR, Financial Accounting and Reporting
Sources for Balance Sheet: Classification and Offsetting
Last reviewed
The standards and authorities behind PocketCPA's FAR lessons on Balance Sheet: Classification and Offsetting. The topic rests on ASC 210.
About this topic
Assets = Liabilities + Equity
A balance sheet with no subtotals answers almost nothing.
Key points
- Current assets are those expected to be realized, sold, or consumed within the operating cycle or one year, whichever is longer.
- Restricted cash is noncurrent when designated for noncurrent purposes, regardless of when the restriction lifts.
- Offsetting an asset against a liability requires all four conditions: mutual obligations, right to set off, intent to set off, and enforceability at law.
- Offsetting changes total assets and total liabilities but never changes working capital or equity.
What the lessons cover
- The classification test: operating cycle or one year, whichever is longer (ASC 210-10-45-1)
- Restricted cash and claims to cash (ASC 210-10-45-4)
- Current liabilities (ASC 210-10-45-5)
- Valuation allowances are deducted, not displayed separately (ASC 210-10-45-13)
- Offsetting: the four conditions for a right of setoff (ASC 210-20-45-1)
Authoritative references
- ASC 210-10-45-1, the definition of current assets and the operating-cycle-or-one-year test.
- ASC 210-10-45-3, classification of assets within the current section.
- ASC 210-10-45-4, exclusion of restricted cash and claims to cash from current assets.
- ASC 210-10-45-5, the definition of current liabilities.
- ASC 210-10-45-13, presentation of valuation allowances as deductions from the related asset.
- ASC 210-20-45-1, the four conditions constituting a right of setoff.
Measurement of the classified amounts belongs to other Topics:
- Cash and cash equivalents, ASC 305.
- Credit losses, ASC 326.
- Inventory, ASC 330.
- Refinancing of short-term obligations, ASC 470.
- Income taxes, ASC 740, including the noncurrent classification of deferred tax amounts.
How PocketCPA uses these sources
Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.