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.

Examples of Temporary Investments

Here are several examples of temporary investments:

Treasury bills. Short-term government securities issued by the U.S. Treasury. Their maturities range from a few days to one year.
Commercial paper. Short-term unsecured debt issued by large corporations to raise funds. The typically matures within 270 days.
Money market funds. Mutual funds that invest in short-term, high-quality debt instruments. Offer higher interest than a regular savings account.
Certificates of deposit. Fixed-term deposits at banks with maturities under 1 year.
Short-term corporate bonds. Bonds issued by companies with maturities of less than a year.
Marketable equity securities. Publicly traded stocks that a company intends to sell within a short period.
Repurchase agreements. Short-term borrowing agreements where securities are sold with an agreement to repurchase later.