IAS 7Chapter 2Lesson 2
Cash and cash equivalents: what does the statement measure?
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The statement explains the change in one aggregate: cash (cash on hand and demand deposits) and cash equivalents (highly liquid investments, convertible into a known amount, with an insignificant risk of changes in value, normally within three months of acquisition). Shares are in principle excluded; overdrafts repayable on demand that form part of cash management are included; movements within the aggregate are not cash flows.
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Learning objectives
- Determine whether an investment is a cash equivalent.
- Analyse whether a bank overdraft forms part of cash.
- Calculate opening and closing cash and cash equivalents, excluding internal movements.