Temporary investments definition

What are Temporary Investments?

Temporary investments are securities that can be sold in the near future, and for which there is an expectation of doing so. These investments are commonly used when a business has a short-term excess of funds on which it wants to earn interest , but which will be needed to fund operations within the near future. These types of investments are usually very safe, but also have quite a low rate of return.

Presentation of Temporary Investments

Temporary investments are always classified as current assets on the balance sheet , since this implies that they will be liquidated within one year. If the investments were to be held for more than one year, then they would be classified on the balance sheet as long-term assets - but if that were the case, the investments would not be called temporary investments.