How are assets classified as current or non-current?

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The key idea is timing: whether an asset is expected to be converted into cash or used up within a short period. An asset is considered current if the entity expects to realize it or consume it within twelve months, or within its normal operating cycle, whichever is longer. If the operating cycle is longer than a year, that longer period governs. Assets not expected to be realized or used within that period are classified as non-current.

In practice, accounts receivable, inventories, and other resources expected to be turned into cash or used within a year (or the operating cycle) are current. Long-term investments, property, plant and equipment, and other assets not expected to be realized or consumed within that time frame are non-current. The rule focuses on the timing of realization, not market value or whether the asset is tangible.