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Fixed Deposit

Abhijeet Joshi (n) (74 Points)

28 September 2017

Whether the fixed Deposit which has a maturity period of more than 1 year will come under cash & cash equivalent???

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Akash ( ) (375 Points)
Replied 28 September 2017

Yes it will come under Cash and Cash Equivalents, however, it the amount shall be separately disclosed.

For example,

Cash in hand XXX

Balance with banks* XXX

Total C&CE XXX

*Balance with banks includes deposits of XXX having maturity of more than 12 months.

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Abhijeet Joshi (n) (74 Points)
Replied 28 September 2017

But will it not contradict the current assets definition

Akash ( ) (375 Points)
Replied 28 September 2017

Schedule III to the Companies Act, 2013 provides that:

An asset shall be classified as current when it satisfies any of the following criteria:—

(a) it is expected to be realised in, or is intended for sale or consumption in, the company’s normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is expected to be realised within twelve months after the reporting date; or

(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

Point (d) specifically suggests that C&CE is a current asset irrespective of point (c). You may also note that there is an 'or' between point (c) and (d).

Hope this clarifies your doubt.

1 Like

Abhijeet Joshi (n) (74 Points)
Replied 28 September 2017

Didn't understood point d can you clarify more

Ashwin Kumar (1234 Points)
Replied 28 September 2017

He is saying since the fd gets matured at the end of one year which is also the time limit for an asset to be classified as current asset the fd will come under the definition of current assets and the additional you will have to do is to disclose it separately from Total cash