What are Other Current Assets - OCA
Other current assets (OCA) is a category of a firm's assets that does not include cash, securities, receivables, inventory and prepaid assets, and can be convertible into cash within one business cycle, which is usually one year. The OCA account is listed on a firm's balance sheet and is a component of a firm's total assets.
BREAKING DOWN Other Current Assets - OCA
A company's total assets listed on its balance sheet are made up of either fixed assets or current assets. Fixed assets typically have useful lives that span over a year and are not liquid. Current assets, on the other hand, can easily be liquidated for cash and are considered when calculating a firm's ability to pay short-term liabilities. Current assets are expected to generate economic benefits within one year or within the normal operating cycle of a business. Some examples of current assets include cash and cash equivalents, marketable securities, accounts receivable, inventory and prepaid expenses. Current assets that are not common 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, which will be explained in a company’s 10-K filings, will result in recognizing other current assets. Because these assets are recorded rarely, or are insignificant, the net balance in the OCA account is typically quite small. Examples of other current assets include: advances paid to employees, advances paid to suppliers, a piece of property that is being readied for sale, restricted cash or investments, and cash surrender value of life insurance policies.
Other current assets are expected to be disposed within a year, or to mature into another form. Thus, the value of a company's other current assets may vary greatly from year to year depending on the health of the company and how it spends its money. It is important to determine how material these assets are, as they may distort a firm's liquidity. If the funds in OCA grow to a material amount, it may include one or more assets that would need to be reclassified into one or more of the major defined current assets 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.
Although it represents a limited source of liquidity for a company and may not have a significant impact on a business’s overall financial situation, other current assets may be discussed in the footnotes to the financial statements, which analysts and investors can refer to if they want information on a firm’s other current assets.