Before the spread of credit crunch, company's investment in money market funds are, in normal circumstances, classified as cash & cash equivalence. The classification is in view of the feature of high liquidity and easily/ readily convertible to known amount of cash.
However, the classifications above need to be challenge. We need to re-consider if the money market funds in current climate continue to meet the criteria of classified as cash & cash equivalence, by considering the following factors:
- short term
- hihgly liquid
- readily convertible