What Are Other Current Assets (OCA)?
Other current assets (OCAs) are short-term liquid assets that don’t fit into standard categories like cash, inventory, or receivables but can be converted to cash within a year. Listed on the balance sheet, OCAs may include items such as employee advances, supplier prepayments, or property held for sale. Though often minor, they provide valuable insight into a company’s liquidity and short-term financial health.
Key Takeaways
- Other current assets (OCA) are liquid assets that can be converted into cash within one year.
- These assets are uncommon or insignificant compared to typical current assets like cash and inventory.
- OCAs appear on the balance sheet and usually represent a small portion of a company’s total assets.
- Examples of OCAs include advances to employees, restricted cash, and property for sale.
- The value of OCAs can vary significantly based on a company’s financial health and spending.
Detailed Insight into Other Current Assets (OCA)
Assets are broken down on the balance sheet as either fixed assets or current assets. Fixed assets are typically long-term tangible pieces of property, such as buildings, computer equipment, land, and machinery, that a firm owns and uses in its operations to generate income. They have useful lives that span over a year and are not liquid.
Current assets, on the other hand, are all the assets of a company that are expected to be conveniently sold, consumed, utilized, or exhausted through standard business operations. They can easily be liquidated for cash, usually within one year, and are considered when calculating a firm’s ability to pay short-term liabilities. Examples of current assets include cash and cash equivalents (CCE), marketable securities, accounts receivable, inventory, and prepaid expenses.
Current assets that are uncommon will not fall into one of the defined categories listed above. Instead, these assets will be lumped together into a generic “other” category and recognized as other current assets (OCA) on the balance sheet.
Sometimes, one-off situations, explained in a company’s 10-K filings, will result in recognizing other current assets (OCA). Because these assets are rarely recorded, or are insignificant, the net balance in the OCA account is typically quite small. Examples of other current assets (OCA) include:
- 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
Analyzing a Real-World Example of Other Current Assets (OCA)
For the quarter ending March 31, 2019, Microsoft Corp. (MSFT) recorded total assets of $263.28 billion on its balance sheet. Of this total, 61% were attributed to current assets. As you can see in the table above, other current assets (OCA) made up a small proportion of the $159.89 billion of current assets. They were listed at $7.05 billion, meaning they accounted for just 4% of the company’s liquid assets.
Important Considerations for Other Current Assets (OCA)
Microsoft did not provide a clearer breakdown of its other current assets (OCA) in its latest 10-Q and 10-K statements. Because they represent a limited source of liquidity for a company and may not have a significant impact on a business’s overall financial situation, not adding more detailed information on them is common.
When other current assets (OCA) are discussed, information will be provided in the footnotes to the financial statements. Explanations may be necessary, for example, when there is a notable change in other current assets (OCA) from one period to the next.
Other current assets (OCA) are expected to be disposed within a year or to mature into another form. Thus, the value of a company’s other current assets (OCA) may vary greatly from year to year, depending on the health of the company and how it spends its money.
Important
It is useful to determine how material these assets are, as they may distort a firm’s liquidity.
If OCA funds grow significantly, they might be reclassified into major current asset accounts. In effect, when funds in OCA grow to a significant level, the account becomes important enough to be listed separately and added to one of the major current accounts on the balance sheet. This provides insight for anyone reviewing the company’s balance sheet since the nature of the recorded items will be better understood.
The Bottom Line
Other current assets (OCAs) are minor, short-term assets that can be converted into cash within one business cycle and are listed on a company’s balance sheet. Examples include employee or supplier advances, property held for sale, restricted cash, or the cash value of life insurance.
Though usually small, changes in OCAs can reflect shifts in a company’s liquidity or spending, making them worth monitoring. Investors should review financial statement footnotes for details when OCA values fluctuate significantly.
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