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The document outlines the recognition, measurement, and disclosure of cash and cash equivalents, including bank overdrafts and compensating balances. It specifies classifications for various financial instruments based on their terms and discusses the treatment of foreign currency and checks. Additionally, it emphasizes the importance of disclosing details of cash and cash equivalents in financial statements.

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Ashryle Salazar
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13 views1 page

ll

The document outlines the recognition, measurement, and disclosure of cash and cash equivalents, including bank overdrafts and compensating balances. It specifies classifications for various financial instruments based on their terms and discusses the treatment of foreign currency and checks. Additionally, it emphasizes the importance of disclosing details of cash and cash equivalents in financial statements.

Uploaded by

Ashryle Salazar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Examples: Bank Overdraft

a. Three-month BSP treasury bill - current liability, should not be offset against
b. Three-year BSP treasury bill purchase other bank accounts w/debit balances.
three months before maturity date.
c. Three-month time deposit Exception:
d. Three-month money market instrument • entity maintain two or more accounts in
or commercial paper. one bank and one account results in an
General rule for RECOGNITION, overdraft, it can be offset against other bank
MEASUREMENT & DISCLOSURE accounts w/a debit balance to show cash,
net of bank overdraft.
• unrestricted for use
Compensating Balance
• payment for current obligations
• not subject to any restrictions, contractual - takes form of minimum checking or demand
• measured at face values. deposit account balance that must be
• disclosed as one – and first-line item in maintained in connection w/a borrowing
current asset, balance sheet. arrangement w/a bank.

Investment of excess cash Classification

Investments in time deposit, money market instruments Deposit Classification


and treasury bills should be classified as follows: not legally restricted as to Part of cash
withdrawal by borrower of
Term Classification informal compensating
Three months or less Cash equivalents balance agreement
More than three months Short-term financial legally restricted as formal compensating
but within one year. assets/current assets compensating balance balance under
More than one year Noncurrent/long-term current assets if
investments related loan is short-
term
Measurement of cash
Undelivered or Unreleased check
• face value
• if foreign currency, measured at current - merely drawn and recorded but not given to
exchange rate. the payee before the end of reporting period.
- no payment when the check is pending release
Foreign currency to the payee at the end of the period.
• translated to PHP using current exchange rate. - AJE required to restore cash balance and set up
• deposits in foreign countries not subject to any liability.
foreign exchange restrictions, included in “cash” Postdated check delivered
• deposits in foreign bank subject to foreign
exchange restrictions should be classified as - check drawn, recorded, and given but bears a
noncurrent assets and restriction clearly date after the end of reporting period.
indicated. Cash
details comprising the cash and cash equivalents should Accounts Payable
be disclosed in the notes of financial statements.
Stale check or check long outstanding
Cash fund for a certain purpose
- not encashed by the payee within a long period
• for use in current operations or payment of of time.
current obligations = current asset. - not accepted by the bank if more than six
• included as part of cash and cash equivalents. months.

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