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Hello, I was doing a multitask question on ACCA StudyHub. Inclusion of “Bank overdraft that is held all year” in cash and cash equivalent was stated incorrect, as per IAS 7, in the answer.
I have watched the lectures, plus read the notes from StudyHub but I still don’t understand why that’s not included.
It is because if the bank overdraft stays the same all year then it is effectively the same as a long-term loan and so is treated as such.
So you mean if we apply the same analogy to a positive bank balance which stays the same all year, we no longer have to classify it under cash and cash equivalents?
No – it is not analogous. A positive bank balance will always be included under cash and cash equivalents.
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