Cash and receivables

Question 1

What is the purpose of holding cash and cash equivalents?

Answer 1

meet short-term cash commitments rather than for investment or other purposes

Question 2

Per IAS 7, what does cash include?

Answer 2

cash on hand and demand deposits

Question 3

What are examples of cash per IAS 7?

Answer 3

• legal tender on hand on business premises, including petty cash
• deposits at banks that are accessible on demand, such as chequing and savings accounts
• foreign currency that can be easily converted into the company’s operating currency

Question 4

Per IAS 7, what are cash equivalents?

Answer 4

short-term, highly liquid investments that are readily convertible to a known amount of cash and which are subject to an insignificant risk of change in value

Question 5

What are examples of cash equivalents per IAS 7?

Answer 5

• drawn bank overdrafts used as part of cash management (deduction from cash equivalent)
• term deposits with a maturity date of three months or less from the date of acquisition
• investments in money market funds
• treasury bills (T-bills) with a maturity date of three months or less from the date of acquisition

Question 6

How are cash and cash equivalents presented on the financials?

Answer 6

presented as current assets and may be grouped together as one line on the balance sheet

Question 7

What is excluded from cash and cash equivalents?

Answer 7

anything that cannot be easily converted to cash or that has a risk of a change in value

Question 8

What are some examples of exclusions from cash and cash equivalents?

Answer 8

• restricted cash
• foreign currency where there is a limited market for exchange into the company’s operating currency
• foreign currency where the exchange rate is unstable and subject to material fluctuations
• publicly traded shares
• publicly traded bonds
• term deposits with a maturity date of greater than three months from the date of acquisition
• T-bills with a maturity date of greater than three months from the date of acquisition
• commodities

Question 9

What are some examples of restricted cash:

Answer 9

• minimum balance requirements in bank accounts
• funds held in escrow
• donations provided for a specific purpose in a not-for-profit organization

Question 10

How is restricted cash presented on the financials?

Answer 10

• as a separate line item (either as a current or non-current asset) on the balance sheet
• the purpose of the restricted cash must be disclosed in the notes to the financial statements

Question 11

How are accounts receivable classified under IFRS 9?

Answer 11

amortized cost

Question 12

What are the classification criteria for amortized cost under IFRS 9?

Answer 12

(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.