june23am (principle) (32 Points)
22 February 2010i 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
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 22 February 2010
In my view it is a cash equivalent only
CA Ayush Agarwal
(Kolkata-Pune-Mumbai)
(27186 Points)
Replied 22 February 2010
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.
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.
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