Cash Equivalents are short-term highly liquid company assets that can be easily converted to cash and are not subject to any significant changes in value.
They are classified as current assets on the Balance Sheet.
There are very rigorous standards for an asset to be classified as a cash equivalent.
Since they are highly liquid and can be easily converted to cash, they perform a dual role of providing a company with minimal returns as well as providing a 'safety net' in case the company goes through a downturn and is in immediate need to pay its bills.
The International Accounting Standard 7 (IAS 7) is an accounting standard that establishes standards for cash flow reporting used in the International Financial Reporting Standards.
It requires the presentation of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows.
You can find more information about IAS 7 here.
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