The FASB recommends that assets and liabilities with differing liquidities be arranged as separate items in the balance sheet.

Question

Quizplus · Accepted Answer

The Financial Accounting Standards Board (FASB) recommends that assets and liabilities be presented in the balance sheet based on their liquidity. This means that assets expected to be converted into cash within one year (current assets) and liabilities expected to be settled within one year (current liabilities) are presented separately from those assets and liabilities not expected to be converted or settled within one year (non-current assets and liabilities). This arrangement helps in assessing the liquidity and financial flexibility of an entity.

The FASB Recommends That Assets and Liabilities with Differing Liquidities