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Red 7… the Winning Number for Money Market Funds?

by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman, EACT

This article describes the accounting issues often encountered by many treasurers when they invest in money market funds (MMF). The IMMFA (Institutional Money Market Funds Association www.immfa.org) has recently issued two interesting policy papers about the international standards IAS 7 and IFRS 7. These documents aim to provide guidance for fund users.

Accounting issues

The accounting issues related to investments in treasury-style money market funds, such as those offered by members of IMMFA, are two-fold:

(1) The classification as ‘cash & cash equivalents’ in order to be deductible from gross debt or to increase the company’s net cash flow, and

(2) More recently, the methodology used and reported in IFRS for Fair Value Measurement.