IFRS Segment Reporting & Cash and Cash Equivalents

Flashcards covering key points on IFRS segment reporting tests and the accounting definition of cash and its components.

What is the accounting definition of cash?

Cash comprises currency and coins on hand as well as any negotiable instrument (e.g., unrestricted checks, bank drafts, money orders) that the bank will accept for immediate deposit and credit.

How does a layman’s concept of cash differ from the accounting concept?

A layman views cash narrowly as currency in circulation and legal tender, whereas accounting defines cash more broadly to include certain negotiable instruments that are readily convertible to known amounts of cash.

Give two examples of negotiable instruments that are treated as cash in accounting.

Unrestricted checks and bank drafts (money orders) that are immediately acceptable for deposit.

Under IFRS 8, what quantitative tests determine whether an operating segment is reportable?

An operating segment is reportable if it meets any of the 10 percent thresholds: (1) its reported revenue (internal and external) is at least 10 % of combined revenues of all segments; (2) the absolute amount of its reported profit or loss is at least 10 % of the greater of (a) the combined profits of all profitable segments or (b) the combined losses of all loss-making segments; or (3) its assets are at least 10 % of the combined assets of all segments.

Which IFRS 8 test focuses on the segment’s profit or loss?

The 10 % profit-or-loss (also called income-or-loss) test.

What rule ensures that the number of reportable segments covers most of the entity’s external revenue?

The 75 % test, which requires that external revenue attributable to reportable segments be at least 75 % of the entity’s total external revenue.

When is a check classified as cash?

When it is unrestricted and acceptable by the bank for immediate deposit (i.e., not post-dated or subject to restriction).

Name one item that is NOT classified as cash for accounting purposes.

Post-dated checks (because they are not presently negotiable).