AS 3

"Cash and Cash equivalent balance"

It is classified under investing activities in page no 1.40. Accounting (IPC)

Right

Its not about right. What is the logic by ICAI yaar. By the logic of ICAI , an operating cycle is one year. Short term deposit gets matured within one year. Then why it is not a cash or cash equivalent?

I think the logic behind this

Cash equivalents are held for the purpose of meeting short-term cash commitments rather than
for investment or other purposes. For an investment to qualify as a cash equivalent, it must be readily
convertible to a known amount of cash and be subject to an insignificant risk of changes in value.
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. Investments in shares are excluded from cash
equivalents unless they are, in substance, cash equivalents; for example, preference shares of a
company acquired shortly before their specified redemption date (provided there is only an insignificant
risk of failure of the company to repay the amount at maturity

From the above they are assuming significant risk in the value in case of premature closure of deposit. But is that really significant?

I am also thinking the same.Will email this query to ICAI Bos.

I am also thinking the same.Will email this query to ICAI Bos.

Yeah. That will be great.I am disturbing them with my queries. Thought of not doing it. Please do it. Share the result here.