3.1.1. Cash and Cash Equivalents

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Cash equivalents are highly liquid, short-term investments that are so close to maturity,6 the risk is minimal that their value will change significantly with changes in interest rates. Cash and cash equivalents are financial assets. Financial assets, in general, are measured and reported at either amortised cost or fair value. Amortised cost is the historical cost (initially recognised cost) of the asset adjusted for amortisation and impairment. Under IFRS, fair value is the amount at which an asset could be exchanged or a liability settled in an arm’s length transaction between knowledgeable and willing parties. Under US GAAP, the definition is similar but it is based on an exit price, the price received to sell an asset or paid to transfer a liability, rather than an entry price.7

For cash and cash equivalents, amortised cost and fair value are likely to be immaterially different. Examples of cash equivalents are demand deposits with banks and highly liquid investments (such as US Treasury bills, commercial paper, and money market funds) with original maturities of three months or less. Cash and cash equivalents excludes amounts that are restricted in use for at least 12 months. For all companies, the Statement of Cash Flows presents information about the changes in cash over a period. For the fiscal year 2009, SAP Group’s cash and cash equivalents increased from €1,280 million to €1,844 million, and Apple’s cash and cash equivalents decreased from $11,875 million to $5,263 million.


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