[Pistachio7785]

This is the explanation for Ninja MCQ #1178(FAR):

“The water utility fund of Hill City would report the 3-month T-bill ($30,000) and the 3-year T-note ($50,000) as cash and cash equivalents. GASB 2450.106 notes that investments with original maturities, to the entity holding the investment, of three months or less, generally qualify as cash equivalents. The 3-year T-note was purchased on 6/15/X3 and matures on 8/31/X3; therefore, it was purchased by Hill City within three months from maturity and can be considered a cash equivalent.”

Is this rule the same for FASB?

Thanks in advance!

[jstay]

lifted this off a website because i didnt want to look exactly on the codification website..last few lines should have answer.

The entire disclosure for cash and cash equivalent footnotes, which may include the types of deposits and money market instruments, applicable carrying amounts, restricted amounts and compensating balance arrangements. Cash and equivalents include: (1) currency on hand (2) demand deposits with banks or financial institutions (3) other kinds of accounts that have the general characteristics of demand deposits (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments maturing within three months from the date of acquisition qualify.

[Pistachio7785]

Thank you!

[musicamor]

Yes, the same framework would apply under US GAAP. The maturity governs the balance sheet classification, not necessarily the statutory term.

Texas CPA - licensed in 2012!!!

[Author]

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