Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

cash equivalent

june23am (principle) (32 Points)

22 February 2010

i got a question regarding cash equivalent...Can short term investment in Mutual funds which are classified as held for trading be considered Cash and cash equivalent?. i can invest in t bills mutual funds than i can consider it cash equivalent? please i need a solid ground information about it

Reply
Follow
Share

4 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 22 February 2010

In my view it is a cash equivalent only

Upgrade to CAclubindia Pro. Subscribe Now!

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27186 Points)
Replied 22 February 2010

Yes, It Will Be Cash Equivalent,

But at The Time of Valuation,The Market Rate Has to Be Taken of Mutual Fund.

Desperado (Cost And Management Accountant) (129 Points)
Replied 22 February 2010

Dear,

This depends on whether what is the nature of Investment, let me clarify that Cash equivalents include highly liquid investments which can readily be converted into known amount of cash.

Short term investments may be considered as cash equivalent since these may be converted into almost known amount of cash, however, there could have some other factors, the consideration of which is crucial in this regard i.e. whether Mutual funds are Open End or Close End funds. If it is close end fund, then they may not be treated as cash equivalent, since they may not be readily cashed and amount to be fetched from sale is also unpredictable.

In case of Open End Fund, it is required to ascertain whether, these funds can be converted into cash when required into known amount of cash, if this is not the case then open end funds may also not be treated as cash equivalent, in the contrary, they may be considered as cash equivalent.

Hope you have been replied.

Best Regards,

Desperado.

1 Like

C.A Rohit Gambhir (C.A) (275 Points)
Replied 03 April 2010

These will be classified as cash equivalent provided these are by virtue of agreement or terms ( not by intention of the investor) with 3 months maturity at the time of investment.