IAS 13, or International Accounting Standard 13, provides guidelines for the presentation of current assets and current liabilities in the financial statements of an entity. The objective of IAS 13 is to ensure that current assets and current liabilities are presented in a manner that is useful to users of financial statements for making economic decisions.
According to IAS 13, current assets are assets that are expected to be realized or consumed within 12 months after the reporting date, or that are held primarily for trading purposes. Examples of current assets include cash and cash equivalents, trade receivables, inventory, and prepaid expenses.
Current liabilities, on the other hand, are obligations that are expected to be settled within 12 months after the reporting date, or that are held primarily for trading purposes. Examples of current liabilities include trade payables, accrued expenses, and short-term loans.
IAS 13 requires that current assets and current liabilities be presented separately from non-current assets and non-current liabilities in the balance sheet. This presentation format allows users of financial statements to easily identify the liquidity position of the entity, as well as its ability to meet its short-term obligations.
Additionally, IAS 13 requires that current assets and current liabilities be presented in order of liquidity. This means that the most liquid assets and the most pressing liabilities should be presented first. For example, cash and cash equivalents should be presented before trade receivables, and trade payables should be presented before short-term loans.
Overall, the presentation of current assets and current liabilities in accordance with IAS 13 provides users of financial statements with important information about an entity’s liquidity and ability to meet its short-term obligations.