Audit and Accounting Guide Depository and Lending Institutions, 2nd Edition

Chapter 6 Cash and Cash Equivalents

Introduction

6.01 Cash and cash equivalents include cash items in the process of collection (CIPC), deposits with other financial institutions, including corporate credit unions, balances with the Federal Reserve Banks and the Federal Home Loan Banks (FHLBs), federal funds sold, and cash and cash equivalents on hand. Instruments that meet the definition of cash and cash equivalents, as defined in the FASB Accounting Standards Codification (ASC) glossary, are discussed in this chapter. Investments in debt and equity securities that are accounted for under FASB ASC 320, Investments—Debt and Equity Securities, are discussed in chapter 7, “Investments in Debt and Equity Securities,” of this guide. Other investments are discussed in chapter 12, “Other Assets, Other Liabilities, and Other Investments,” of this guide. The fair value option for financial assets and liabilities under FASB ASC 825, Financial Instruments, is addressed in chapter 20, “Fair Value,” of this guide.

CIPC and Cash Equivalents

6.02 CIPC includes customer deposits drawn on other depository institutions that have not yet cleared, matured instruments (such as coupons and bonds), and other matured items temporarily held pending their liquidation. Such assets are received with deposits and other customer transactions. CIPC are eventually cleared through local clearinghouses, correspondent institutions (correspondents), or a Federal Reserve Bank. Collection of these items generally ...