Components of cash and reconciliation

Learning objectives

• Prepare the disclosures about the components of cash and cash equivalents, the reconciliation with the statement of financial position and the policy adopted in determining them.L1, L2

Normative references

• IAS 7 §45An entity discloses the components of cash and cash equivalents and presents a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position.
• IAS 7 §46In view of the variety of cash management practices and banking arrangements, an entity discloses the policy that it adopts in determining the composition of cash and cash equivalents.
• IAS 7 §47The effect of any change in the policy for determining components of cash and cash equivalents (for example a change in the classification of financial instruments previously considered to be part of an entity's investment portfolio) is reported in accordance with IAS 8.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

12 questions

• The entity discloses the components of cash and cash equivalents and reconciles the amounts in the statement of cash flows with the items in the statement of financial position.L1
• The effect of changing the policy used to determine what makes up cash and cash equivalents is reported under IAS 8.L1
• As the composition of cash and cash equivalents is fixed by the standard with no room for judgement, the entity need not disclose its policy for determining it.L2
• Why may a reconciliation between cash in the statement of cash flows and the statement of financial position be needed?L1
• Halbane decides no longer to classify as cash equivalents some money market funds previously included. How should this change be treated?L2
• What information must Ostmira give on how it determines its cash and cash equivalents?L2
• Corlis's statement of financial position: “cash” {cash_line}; 2-month deposits (equivalents) presented in “other financial assets” {deposits_in_other_assets}; overdraft integral to cash management presented in “borrowings” {overdraft_in_borrowings}. Compute cash in the statement of cash flows.L1
• Velbris's statement shows closing cash of {cash_in_statement}. It includes an integral overdraft of {overdraft} presented in borrowings and 1-month commercial paper of {commercial_paper} presented in investments. What amount appears in the “cash” line of the statement of financial position?L2
• Calmira's policy (case data) is to include in cash deposits with an original maturity of 3 months or less and its on-demand overdrafts. At 31 December: cash and accounts {cash_and_accounts}; 1-month deposits {one_month_deposits}; 6-month deposits {six_month_deposits}; on-demand overdrafts {overdrafts}. Compute cash in the statement.L2
• Closing cash in Nelmira's statement (720,000) differs from the “cash” line of its statement of financial position (800,000) because of an overdraft included in cash; no explanation is given. What is the error?L1
• Brelvis now excludes from cash some funds previously included and presents the difference (400,000) as an investing outflow of the year, without restating comparatives. What is the error?L2
• Selmira includes certain overdrafts and deposits of up to 3 months in cash, but its notes do not describe the policy adopted. What is the error?L2