Deposit accounts with banks – disclosure on the statement of financial position

Deposits in banks are tricky when it comes to disclosing them on the statement of financial position or balance sheet. There are different types of deposits and it may very well that there are different types used in your company alone.

Factors to be considered when deciding whether the deposit is in fact a cash equivalent or a receivable are as follows: 

o   The term of the deposit in itself. Many accounting frameworks consider deposits for 3 months or less of a period as cash equivalents. Anything for a longer period should be carefully considered.

o   Question to also answer is “How easily I can take the funds out as I need them?” If the answer is “I cannot under any circumstances”, it’s more likely a receivable account.

o   One other consideration you should make is regarding the termination and how easy it is to actually terminate the deposit agreement. Consider the conditions under which you’d be able to do it.

If the answer to the considerations is more inclined towards that the balance is tied with various conditions and you cannot take the funds out as easily as one would expect taking money from a regular bank account, it’s more likely the deposit should be disclosed as a receivable on the balance sheet.