Cash & Equivalents

Question 1

IAS 7: Statement of cash flows, what is cash?

Answer 1

Cash comprises of cash on hand and demand deposits

Question 2

Cash equivalents

Answer 2

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 3

Examples of cash

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

Examples of cash equivalent

Answer 4

• drawn bank overdrafts used as part of cash mgmt
• term deposits with a maturity date of 3 months or less
• investments in money market funds
• t-bills with a maturity date of 3 months or less

Question 5

Restricted cash

Answer 5

• not included as part of cash and cash equivalents on the balance sheet
• presented as a separate line item (either current or non-current)
• purpose of restricted cash must be disclosed in the notes to the financial statements

Question 6

Examples of restricted cash

Answer 6

• minimum balance requirements in bank accounts
• funds held in escrow
• donations provided for a specific purpose in a NPO