Is a Loan a Current Asset? FAQs
A loan is an amount of money borrowed from a lender, typically in exchange for the promise to pay back the funds at an interest rate and over a set period of time.
No, loans are not current assets because they do not represent something that can be converted into cash within one year. They are instead classified as long-term liabilities or investments, both of which appear on the balance sheet as non-current assets.
A current asset is any asset that will provide an economic benefit for or within one year.
The primary factor determining if a loan is considered a current asset depends on when it needs to be repaid, rather than when it is received. If the loan needs to be repaid within one year, then it will be classified as a current asset.
Yes, there may be certain circumstances where loans could be considered a current asset if they meet certain qualifications or criteria set forth by authorities such as the International Financial Reporting Standards (IFRS). For example, if a loan is expected to mature in less than 12 months and cannot be refinanced, then it might be classified as a current asset. However, these exceptions are rare and should be considered on a case-by-case basis. It is always best to consult an accountant or financial expert for additional guidance.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
