Stay current on changes and developments in corporate law with a wide variety of resources and tools.
By Steven Marcy
Nov. 17 —Analysts and investors should have a sharper picture of how a company uses its funds under an amendment to the Financial Accounting Standards Board’s rules on stating cash flows.
The Nov. 17 amendment—Accounting Standard Update No. 2016-18, Statement of Cash Flows (ASC 230), Restricted Cash—is intended to provide more clarity and eliminate diversity in practice for how a company reports its cash, cash equivalents and restricted cash.
Restricted cash is money set aside for a particular purpose and usually unavailable for general use. Cash equivalents are highly liquid assets—usually with maturities of not more than three months—that are readily convertible to cash.
Currently, “entities classify transfers between cash and restricted cash as operating, investing, or financing activities, or as a combination of those activities, in the statement of cash flows,” said the update to ASC 230.
“Also, some entities present direct cash receipts into, and direct cash payments made from, a bank account that holds restricted cash as cash inflows and cash outflows, while others disclose those cash flows as noncash investing or financing activities,” it said. “This Update addresses that diversity.”
FASB’s amendment will require the statement of cash flows to explain the changes in cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents for each quarter. When companies reconcile their amounts of money at the beginning of a quarter and the end of a quarter, they should include restricted cash and restricted cash equivalents along with regular cash and cash equivalents, the amendment said.
FASB said the update will be effective for public business entities for fiscal years beginning after Dec. 15, 2017, and interim periods within those fiscal years. For all other entities, it will be effective for fiscal years beginning after Dec. 15, 2018.
FASB voted to Oct. 5 to finalize the amendment for publication.
To contact the reporter on this story: Steven Marcy in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
FASB’s cash flow amendment is available at http://src.bna.com/j9P.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)