Title: Cash Equivalents and Gross Versus Net Presentation: Issues and Examples
Abstract: This chapter focuses on two troublesome preparation and presentation issues in cash flow accounting, including the issue of determining a cash equivalent and the acceptability of net rather than gross presentation of cash inflows and outflows. The chapter describes the activity method to improve statement comparability for use in the statement of cash flows. The statement of cash flows presents information on cash receipts and cash payments during the reporting period. The focus is on cash because external statement users typically focus on assessments of future cash flows. A cash equivalent is a short-term liquid asset that the entity views as the same as cash, which must be easily convertible to known amounts of cash and have insignificant credit risk. Activities that are part of the cash management process and qualify as cash equivalents do not appear on the statement of cash flows except as part of cash and cash equivalents totals. An entity must disclose what types of investments qualify as cash equivalents for its financial reports. Cash and cash equivalents include cash on hand and on deposit along with liquid debt investment instruments with maturities generally of three months or less.
Publication Year: 2018
Publication Date: 2018-03-31
Language: en
Type: book-chapter
Indexed In: ['crossref']
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