Cash and cash equivalents
Cash and cash equivalents is the balance-sheet caption combining cash on hand, bank balances and short-term deposits so close to maturity that their payout is effectively fixed, typically falling due within three months of acquisition.
FrameworkIAS 7
See it move
A company holds €12,000 of cash on hand, €340,000 in its bank current account, and a €150,000 deposit maturing within three months — together €502,000 of cash and cash equivalents. A separate €200,000 nine-month deposit is excluded entirely, since its original maturity exceeds the three-month test.
The formula
Variables
- Physical cash on hand (€)
- Bank current account and demand deposit balances (€)
- Short-term deposits or instruments with original maturity of three months or less (€)
Only instruments meeting the short-maturity, insignificant-risk test at the date of acquisition are included; anything with a longer original term is a short-term investment instead.
Check yourself
A company's records at year end show: cash on hand of €8,500; a bank current account balance of €215,000; a money market fund redeemable within 5 days of €90,000; and a fixed-term deposit of €120,000 with an original maturity of 6 months. What amount should be reported as cash and cash equivalents?