The Institutional Money Market Funds Association (IMMFA) believes that triple-A rated institutional money market funds can be treated as cash equivalent, in accordance with IAS 7.
The agreement allows corporate investors to treat IMMFA member funds as cash equivalent when preparing their financial statements according to the presentation rules outlined in IAS 7. Cash equivalents are held for the purposes of meeting short-term commitments rather than for investment or other purposes; the cash flow statement can, therefore, include holdings in money market funds.
To assist corporate investors with the preparation of their financial statements, IMMFA has produced a position statement which outlines the rationale behind the interpretation of IAS 7. The Association recommends that investors should discuss how to report such funds with the relevant reporting entity concerned with the compliance of internal accounting policy and the relevant external auditor.
Donald Aiken, chairman of IMMFA, said, “The conclusion that money market funds provided by IMMFA members can be held as cash equivalent is welcome news for corporate investors. The interpretation of IAS 7 in this way is further recognition of the important role our funds can play in meeting liquidity requirements for investors rather than relying solely on traditional bank deposits.”