Cash, Cash Equivalents, and Investments

This chapter discusses the industry-pervasive matters about accounting for cash and cash equivalents, including centralized cash management arrangements, cash from restricted donations, and other restricted or designated cash amounts. Many health care entities have centralized cash management arrangements whereby excess cash is swept into a cash pool. Subsidiary cash requirements are met through withdrawals or borrowings from the cash pool. The cash pool is invested in assets, such as deposits at banks, which are in the parent company's name. Funds deposited by a subsidiary in a parent company's cash account under a centralized cash management arrangement generally would not be classified as cash and cash equivalents in the subsidiary's financial statements if the subsidiary does not have legal title to the cash on deposit. The legal structure, term, and features specific to an instrument, such as restrictions on disposing of the investment or other internal and external restrictions, can affect both the accounting and reporting of an investment and the valuation of the investment.