The concepts of cash and cash equivalents are central to the preparation of consolidated cash flow statement.Consider the following:
I.$\quad$currency held by a foreign operation that is not denominated in its functional currency
II.$\quad$currency held by the parent entity that is not denominated in its functional currency
III.$\quad$currency held by the parent entity denominated in its presentation currency
IV.$\quad$currency held by a foreign operation denominated in its presentation currency
Which of the above items may not always satisfy the definition of cash and cash equivalents assuming an entity's presentation currency is its functional currency?

Question

Quizplus · Accepted Answer

Items I and II may not always satisfy the definition of cash and cash equivalents because they involve currency not denominated in the entity's functional currency, which can introduce exchange rate risk and may affect liquidity. Items III and IV, involving currency held in the entity's presentation or functional currency, are typically considered cash or cash equivalents.

The Concepts of Cash and Cash Equivalents Are Central to the Preparation