What Are Other Current Assets (OCA)?
Other current assets (OCA) is a category of things of value that a company owns, benefits from, or uses to generate income that can be converted into cash within one business cycle. They are referred to as “other” because they are uncommon or insignificant, unlike typical current asset items such as cash, securities, accounts receivable, inventory, and prepaid expenses.
The OCA account is listed on the balance sheet and is a component of a firm's total assets.
- Other current assets are liquid assets that are characterized as uncommon or insignificant.
- They are listed on the balance sheet alongside other assets and are convertible into cash within one year.
- Because these assets are recorded rarely, or are insignificant, the net balance in the OCA account is typically quite small.
Understanding 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
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.
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.
It is useful 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.