Under IAS 7, which condition normally supports classifying an investment as a cash equivalent?
Correct answer: B. It is readily convertible to a known cash amount
- A. It is held for resale as inventory
- B. It is readily convertible to a known cash amount
- C. It has a maturity of more than one year
- D. It is expected to earn a high return
Explanation
Cash equivalents are short-term, highly liquid investments that can be converted readily into known amounts of cash with insignificant risk of value changes. A high return or resale intention does not by itself satisfy this definition.
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