Definitions for Cash Flow Statements
The financial reporting standards (FRS) include the following important definitions. Note particularly the definitions of cash and liquid resources.
- An active market is a market sufficient depth to absorb the investment help without a significant effect on then price.
- Cash is cash in hand and deposits receivable on demand with any qualifying financial institution, less overdrafts from any qualifying financial institution repayable on demand. Deposits are repayable on demand if they can be withdrawn at any time without notice and without penalty or if a maturity or period of notice of not more than 24 hours or one working day has been agreed. Cash includes cash in hand and deposit denominated in foreign currencies.
- Cash flow is an increase or decrease in an amount of cash.
- Liquid resources are current asset investments held as readily disposable store of value. A readily disposable investment is one that:
1. Is disposable by the reporting entity without curtailing or disrupting its business
2. Is either, readily convertible into known amounts of cash at or close to its carrying amount or trade in an active market.
- Net debt is the borrowings of the reporting entity less cash liquid resources. Where cash and liquid resources exceed the borrowings of the entity reference should be to “net funds” rather than to “net debt”.
- Overdraft is a borrowing facility receivable on demand that is used by drawing on a current account with a qualifying financial institution.