Question

Describe weaknesses and inconsistencies in accounting for noncurrent security investments that are relevant for analysis purposes.

Answer 1

Security investments that do not meet both criteria should be classified as long-term. For example, stocks of privately held corporations are likely to have very limited markets, and as the result, such equity investments would not meet the first criterion and should be classified as long-term. Management might not have intent to sell the investment in the near term, and as the result, such an investment should be classified as long-term.