Statement of cash flows project

Purpose of holding cash equivalents 

Paragraph 6 of IAS 7 provides a definition of cash equivalents, while paragraph 7 of IAS 7 states that cash equivalents are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes. 

The IASB tentatively decided to incorporate the wording on the purpose of holding cash equivalents into the definition in paragraph 6. 

Three-month maturity 

Paragraph 7 of IAS 7 sets a maturity threshold of three months from the acquisition date (“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.”) The IASB has not yet reached any decisions on possible clarifications, and is planning to explore various solutions.