Question

Mr. Fran Finalize, office managing partner of Finalize & Associates Inc. has asked you to research the following question:

Are there any circumstances when cash and cash equivalents held by a client might not be included in Current Assets? Hint look up ASC 954-210-45.

Fran has asked you to write a memo that she will share with the firm's client who needs the correct answer to this question within a few days.

REQUIRED

Write a memo with your answer addressed to Ms. Fran Finalize. Make sure to include the circumstances when cash and cash equivalent held by the client might not be listed as a current asset in the client's balance sheet. You must support your answer by clearly referencing the appropriate ASC.

Your memo must be in good form, concise, contain no technical writing errors (i.e., correct spelling, good sentence structure, and good grammar) and written clearly. You should not merely copy and paste from the ASC. Fran will reject your memo if you fail to reference the appropriate ASC.

Memos should be no longer than 200 words.

Answer 1

Dear Mr. John,

Subject: Exclusion of Cash & Cash Equivalent from Current Assets

With reference to above, I would like to draw your attention to the treatment of cash & cash equivalent in certain defined circumstances where they need to be excluded from Current Assets.

The Accounting Standards Committee has drafted ASC 954-210-45,to clarify the same. As per ASC 954-210-45-5, Cash & Cash equivalent need to be reported separately in following circumstances:

a. They are restricted as to withdrawal or use for other than current operations.

b. They are designated for expenditure in the acquisition or construction of noncurrent assets.

c. They are required to be segregated for the liquidation of long-term debts.

d. They are limited to use for long-term purposes by a donor-imposed restriction.

Hence, based on the above, we can't treat these under Current Assets. The same has been recorded for your reference.

Thanking You,

Yours Truly,

Fran Finalize