FRS102 bank deposits disclosure

Cash at bank vs Current asset investment

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Hi, wondering if anyone can help as I'm going around in circles. Looking at a set of accounts prepared under FRS102 - within the balance sheet are money market term deposits maturing 6 months from investing. I am aware that for the cashflow statement technically these are not cash equivalents as the maturity from investment is not less than 3 months. However should the deposits awhich haven't matured at the year end be included in the Balance Sheet as Cash at bank or Current asset investments? If the deposits are Current asset investments presumably each deposit and withdrawl in any year would need disclosing in the Cash Flow Statement "Investing Activities" section i.e a £500k deposit which matured in the same year as investment would be both Incoming and Outgoing in the Cash Flow Statement "Investing Activities" section. 

Any help would be much appreciated.

Thanks

 

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By paul.benny
20th Oct 2023 11:25

I think I would treat the deposits as cash equivalents - defined in FRS102 as "Short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value."

The Standard does not define short term - what's the source of the 3 month rule that you reference?

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Replying to paul.benny:
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By millertime
20th Oct 2023 11:45

The 3 months is referenced in articles by the standards board etc. plus in PWC FRS102 illustrative accounts they disclose the following accounting policy note -

Cash and cash equivalents
7.2 Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts,
when applicable, are shown within borrowings in current liabilities.

Also in the same accounts, the current asset investments note includes short term deposits with a disclosure "11.42 Investments in short term deposits have an original maturity of 3 months or less. At the balance sheet date the average maturity of the deposits was 1 month (2021: 2 months). The average
interest rate was 0.9% (2021: 1.0%)"

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Replying to millertime:
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By paul.benny
20th Oct 2023 13:05

I interpret the three months given in the PwC model statements as illustrative rather than prescriptive. The definition doesn't appear in FRS102. I would use the accounting policy note that you quote, only stating maturities of six months or less.

I notice from your quotes that the PwC statements appear internally inconsistent, treating deposits as both cash equivalents and current asset investments.

I might perhaps give an analysis of the cash in a note, showing the deposit amount separately, with an indication of the maturity (or weighted average maturity)

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Replying to paul.benny:
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By Bobbo
20th Oct 2023 13:36

Whilst it doesn't appear in the 'definitions' section of FRS 102, Para 7.2 of FRS 102 does say.

"Therefore, an investment normally qualifies as a cash equivalent only when it
has a short maturity of, say, three months or less from the date of acquisition."

I suppose it depends on your view of the term 'normally'.

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