What Are Other Current Assets (OCA)?
Let me explain what other current assets (OCA) are. They're a category of valuable items that your company owns, benefits from, or uses to generate income, and you can convert them into cash within one business cycle. I call them 'other' because they're uncommon or insignificant compared to the usual suspects like cash, securities, accounts receivable, inventory, and prepaid expenses.
You'll find the OCA account right there on the balance sheet, as part of the firm's total assets.
Key Takeaways
Here's what you need to know: Other current assets are liquid assets that stand out as uncommon or insignificant. They're listed on the balance sheet with other assets and can turn into cash within one year. Since they're recorded rarely or are minor, the net balance in the OCA account is usually quite small.
Understanding Other Current Assets (OCA)
On the balance sheet, assets break down into fixed or current types. Fixed assets are long-term tangible items like buildings, computer equipment, land, and machinery that your firm owns and uses for operations to generate income. They last over a year and aren't liquid.
Current assets, in contrast, are everything a company expects to sell, consume, use, or exhaust through normal operations. You can liquidate them easily for cash, typically within one year, and they're key when figuring a firm's ability to cover short-term liabilities. Think cash and equivalents, marketable securities, accounts receivable, inventory, and prepaid expenses.
If a current asset doesn't fit those defined categories because it's uncommon, it gets grouped into this generic 'other' category and shows up as other current assets (OCA) on the balance sheet.
Sometimes, unique situations detailed in a company's 10-K filings lead to recognizing OCA. These are rarely recorded or insignificant, so the OCA balance stays small.
Examples of Other Current Assets (OCA)
- Advances paid to employees or suppliers
- A piece of property that is being readied for sale
- Restricted cash or investments
- Cash surrender value of life insurance policies
Real-World Example of Other Current Assets (OCA)
Take Microsoft Corp. (MSFT) for the quarter ending March 31, 2019. They reported total assets of $263.28 billion. Current assets made up 61% of that. Other current assets were a small slice at $7.05 billion, just 4% of the company's liquid assets.
Special Considerations
Microsoft didn't break down its OCA further in recent 10-Q and 10-K statements. That's common since they provide limited liquidity and don't hugely impact the business's finances.
When we talk about OCA, you'll find details in the financial statements' footnotes. You might need explanations, especially for notable changes from one period to the next.
OCA are expected to be disposed of within a year or mature into something else. So, their value can fluctuate a lot year to year, based on the company's health and spending.
It's useful to check how material these assets are, as they could distort a firm's liquidity picture. If OCA funds grow to a material amount, they might include assets that need reclassifying into major current asset accounts. Essentially, if OCA becomes significant, it gets its own line on the balance sheet for clarity, helping anyone reviewing it understand the items better.
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