You know that you have to make a distinction of current and non-current on your balance sheet, but which method to choose. See also our post regarding the two methods being described in “Distinction of current and non-current on statement of financial position”.

Now when it comes to choosing the method, above all you must remember that the method you opt for, needs to present information in a most reliable and relevant manner as compared to the other option. It’s not just what you like but how it presents information to the users of the financial information. 

As a general rule, if your company supplies goods and / or services within a clearly identifiable operating cycle (i.e. a quarter, a year), separate classification of current and non-current assets and liabilities on the balance sheet should be made. Why? It would be useful and informational to distinguish the working capital that’s continously circulating from the assets used by the entity for a longer period of time, i.e. machinery that’s used to generate the working capital.

However, if your company does not supply goods and / or services within a clearly identifiable operating cycle, for an example if your in the business of providing financial services (i.e. insurance, loans etc.), it would make more sense to show your assets and liabilities based on their liquidity. It would be more relevant to your business.

Not to provide you with clear rules, but more of guidelines, do take the considerations given from above and adopt your own methods for classifying your assets and liabilities as current and non-current.