Bank overdrafts and cash and cash equivalents

IAS 7.8 notes that although bank borrowings are generally considered to be financing activities, in some countries bank overdrafts form an integral part of an entity’s cash management. In such cases, bank overdrafts are included as a component of cash and cash equivalents meaning that bank overdraft balances would be offset against any positive cash and cash equivalent balances for the purposes of the statement of cash flows.

However, care is required when presenting bank overdrafts, and cash … Continue reading

Off-setting of financial assets and financial liabilities

IAS 32 prescribes rules for the offsetting of financial assets and financial liabilities. It specifies that a financial asset and a financial liability should be offset and the net amount reported when and only when, an enterprise:

  • has a legally enforceable right to set off the amounts; and
  • intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.