Response to diana Hello, There are few criteria’s that a company could use to determine whether an investment is reported as cash equivalent or an investment on the classified balance sheet. First a company should evaluate if the investments are highly liquid and ready to be converted into cash, with minimum risk in changes in value due to interest rates. Another guideline to determine a long-term vs. short-term investment is by the maturity dates of the investments. If the maturity date of the investment is three months or less from the acquired date, then the investment is considered a short-term or cash equivalent. Some examples of cash equivalents are treasury bills, commercial paper, money market funds, short-term government bonds, etc. (Jones, J. P., Pagach, D.P., & Wahlen, J.M., 2017). Examples of long-term investments include stocks, mutual funds, real estate, long-term bonds, etc. Long-term investments are high risk due to the changes in value of the interest rates and have maturity dates that are over three months of the date required; therefore, not ready to be converted into cash. An amendment of the FASB accounting standards codification updated in November 2016 provides some cash restrictions principles to improve the main provisions from the generally accepted accounting principles (GAAP) (FASB, 2016). Companies should analyze and comply with these standards to differentiate between short-term and long-term investments, and to accurately report cash equivalents and long-term investments. References Financial Accounting Standards Board (2016). Statement of cash flows (Topic 230), restricted cash. Retrieved from https://asc.fasb.org/imageRoot/15/98552915.pdf Jones, J.P., Pagach D.P, & Wahlen J. M. (2017). Intermediate accounting: reporting and analysis (2nd ed.). Cengage Learning. Response to Nicholas When listing cash equivalents on a balance sheet, there are a few things which need to be taken into consideration. First off, our webtext states cash equivalents are "short-term, highly liquid investments that are readily convertible into known amounts of cash and so near their maturity that there is little risk of changes in value because of changes in interest rates." Typically the rule of thumb is a low risk highly liquid investment which is three months or less from the maturity date are considered a cash equivalent. Some example of this are securities such as treasury bills, commercial paper, and money market funds (Wahlen, Jones, & Pagach, 2017, ch 6.1a). The following are not a cash equivalent; sinking funds are considered long-term investments and certificate of deposits are categorized as short-term investments Reference Wahlen, J., Jones, J., & Pagach, D. (2017). Intermediate Accounting: Reporting and Analysis (2nd ed.). Cengage Learning. Discussion Rubric: Undergraduate Your active participation in the discussion topics is essential to your overall success this term. Discussion questions are designed to help you make meaningful connections between the course content and the larger concepts and goals of the course. These discussions offer you the opportunity to express your own thoughts, ask questions for clarification, and gain insight from your classmates’ responses and instructor’s guidance. Requirements for Discussion Topic Assignments Students are required to post one initial post and to follow up with at least two response posts for each discussion topic assignment. For your initial post (1), you must do the following:  Compose a post of one to two paragraphs.  In Module One, complete the initial post by Thursday at 11:59 p.m. Eastern Time.  In Modules Two through Eight, complete the initial post by Thursday at 11:59 p.m. of your local time zone.  Take into consideration material such as course content and other discussion topics from the current module and previous modules, when appropriate (make sure you are using proper citation methods for your discipline when referencing scholarly or popular resources). For your response posts (2), you must do the following:  Reply to at least two different classmates outside of your own initial post thread.  In Module One, complete the two response posts by Sunday at 11:59 p.m. Eastern Time.  In Modules Two through Eight, complete the two response posts by Sunday at 11:59 p.m. of your local time zone.  Demonstrate more depth and thought than simply stating that “I agree” or “You are wrong.” Guidance is provided for you in each discussion prompt. Rubric Critical Elements Comprehension Timeliness Exemplary (100%) Develops an initial post with an organized, clear point of view or idea using rich and significant detail Proficient (85%) Develops an initial post with a point of view or idea using adequate organization and detail Submits initial post on time Needs Improvement (55%) Develops an initial post with a point of view or idea but with some gaps in organization and detail Submits initial post one day late Not Evident (0%) Does not develop an initial post with an organized point of view or idea Value 40 Submits initial post two or more days late 10 Engagement Provides relevant and meaningful response posts with clarifying explanation and detail Provides relevant response posts with some explanation and detail Provides somewhat relevant response posts with some explanation and detail Provides response posts that are generic with little explanation or detail 30 Writing (Mechanics) Writes posts that are easily understood, clear, and concise using proper citation methods where applicable with no errors in citations Writes posts that are easily understood using proper citation methods where applicable with few errors in citations Writes posts that are understandable using proper citation methods where applicable with a number of errors in citations Writes posts that others are not able to understand and does not use proper citation methods where applicable 20 Total 100%
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