Cashequivalents

Cashequivalents is a nonstandard term that refers to cash equivalents in financial accounting. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. They typically have original maturities of three months or less from the date of acquisition.

Typical examples include U.S. Treasury bills, money market funds, commercial paper, and certificates of deposit with short maturities. Some bank products, such as negotiable certificates of deposit, may qualify as cash equivalents if their remaining life is three months or less; eligibility depends on the accounting framework and policy of the reporting entity.

In financial reporting, cash equivalents are reported as a current asset on the balance sheet, alongside cash. The cash flow statement presents changes in cash and cash equivalents, with inflows and outflows from operating, investing, and financing activities, depending on the nature of the underlying instrument and the entity’s accounting policies.

Differences across accounting frameworks are generally modest, as both IFRS and US GAAP define cash equivalents similarly: short-term, highly liquid investments readily convertible to cash with insignificant risk of changes in value. The exact measurement and presentation can vary by policy, and in practice the term cashequivalents may be used informally to refer to this category.