Question

Is Land properly classified as a current asset or a long term asset? Could one company own several parcels of land with one parcel of land classified as a current asset and a different parcel classified as long term? What would be the difference between the two parcels?

Answer 1

Land is a fixed assets because the benefits from the land are realised in more than one year. Assets are classified as current asset only if there is an expection that they will be realised within one year, land should not be classified as a current asset. Instead, land is classified as a long-term asset, and so is categorized within the fixed assets classification on the balance sheet.

Land has the longest life compared to other assets as its value never depreciates. So it is used for life time. The only exception is when natural resources are being extracted from land, in that case the expected depletion period for the resource extraction could be considered the life of the land asset.

No company can classify one parcel of land as current and other as non current asset. The only way land can be considered as current asset is when. Depletion period of natural resources being extracted from land, is considered as the life of the land asset and it is less than one year.

So it's already explained how we would classify assets as current or non current.