An item that qualifies as a cash equivalent in the cash flow statement of a subsidiary will always qualify as a cash equivalent in the consolidated cash flow statement.

Question

Quizplus · Accepted Answer

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and so close to their maturity that they present insignificant risk of changes in value because of changes in interest rates. Whether an item qualifies as a cash equivalent might vary between a subsidiary and the consolidated entity due to differences in intent and ability to use these assets within the necessary short-term framework, as well as differences in the applicability of the definition based on the entity's specific circumstances and strategies.

An Item That Qualifies as a Cash Equivalent in the Cash