Cash and Cash Equivalents in SFAS 95

B

Bank accounts, U.S. Treasury Bills, and similar assets qualify.

According to SFAS 95 (Statement of Financial Accounting Standards No. 95), cash and cash equivalents are defined as highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Cash and cash equivalents are considered to be a part of a company's current assets and are typically included in the balance sheet.

Let's analyze each answer choice in relation to the definition provided by SFAS 95:

A. Bank accounts, U.S. Treasury Bills, and fixed income securities: This option includes bank accounts, U.S. Treasury Bills, and fixed income securities. While bank accounts can be considered cash and cash equivalents, U.S. Treasury Bills and fixed income securities may not necessarily meet the criteria of having original maturities of three months or less. Therefore, this option does not fully align with the definition provided.

B. Risk-free assets with original maturities of 90 days or less: This option states that cash and cash equivalents include risk-free assets with original maturities of 90 days or less. While it specifies the original maturities, SFAS 95 requires the original maturities to be three months or less, which is equivalent to 90 days. Therefore, this option correctly reflects the definition provided.

C. Risk-free assets with original maturities of 30 days or less: This option states that cash and cash equivalents include risk-free assets with original maturities of 30 days or less. However, SFAS 95 specifies that the original maturities should be three months or less, not 30 days. Hence, this option does not accurately reflect the definition.

D. Bank accounts, U.S. Treasury Bills, and marketable securities: This option is similar to option A, including bank accounts and U.S. Treasury Bills. However, it adds marketable securities, which may or may not meet the criteria of having original maturities of three months or less. Therefore, this option does not fully align with the definition provided.

E. Only bank accounts: This option states that cash and cash equivalents include only bank accounts. While bank accounts can be considered cash and cash equivalents, SFAS 95 allows for the inclusion of other highly liquid investments that meet the specified criteria. Therefore, this option is not comprehensive enough to reflect the definition provided.

In conclusion, the answer that best aligns with SFAS 95 is option B: risk-free assets with original maturities of 90 days or less.