cash equivalents

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Highly liquid investments that are capable of being converted into known amounts of cash without notice and that were within three months of maturity when acquired; from this total must be deducted bank advances that are repayable within three months from the date of the advance. Cash equivalents are an important element of a cash-flow statement as required by Financial Reporting Standard 1 and International Accounting Standard 7. There has been some controversy regarding the requirement for three months maturity, which is an issue to be reconsidered when the standard is reviewed.

Subjects: Accounting.

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