What is “Cash and Cash Equivalents”?

Cash and cash equivalents includes all cash and highly liquid assets with a short term to maturity (generally 90 days or 3 months). This line item is always categorized as a current asset.

Key Learning Points

  • Cash and cash equivalents is reported at the top of the company’s balance sheet and includes all highly liquid assets with maturities of up to 3 months
  • Due to its high liquidity, they are included in the calculation of net debt
  • It is classified as an asset which means it is a resource owned or controlled by a business with the expectation of producing future economic benefits
  • IFRS outlines specific guidelines for the treatment of overdrafts/revolvers which allows them to be deducted from the cash and cash equivalents balance sheet and cash flow statement balances

Overdrafts and Cash and Cash Equivalents

Under IFRS bank overdrafts or revolvers may be deducted as negative cash. IFRS allows two treatment options for overdrafts / revolvers as follows:

  • Deducted from cash and cash equivalents in both the balance sheet and cash flow statement

Cash, Cash Equivalents and Bank Overdrafts
Cash, cash equivalents and bank overdrafts includes cash at bank and in hand plus short–term deposits less overdrafts. Short–term deposits have a maturity of less than three months from the date of acquisition. Bank overdrafts are repayable on demand and form an integral part of the Group’s cash management.
PZ Cussons Plc Extract from footnote 1

PZ Cussons Plc Extract from footnote 1

  • Deducted from cash and cash equivalents in the cash flow statement only

Cash and Cash Equivalents
On the Balance Sheet, cash and cash equivalents comprise cash and short–term deposits with a maturity date of three months or less, held with banks and liquidity funds. In the Statement of Cash Flows, cash and cash equivalents also include bank overdrafts, which are recorded under current liabilities on the balance sheet.
Burberry Group Plc – Extract from footnote 2


Under US GAAP overdrafts and revolvers are always treated as a liability and therefore never included in the cash and cash equivalents number.

Cash Equivalents are considered all highly liquid investments with original maturities of three months or less.
Fossil Group Inc – Extract from footnote 1