Proposed ASU addresses restricted cash in the statement of cash flows
FINANCIAL REPORTING INSIGHTS |
Currently diversity exists in the classification and presentation of changes in restricted cash on the statement of cash flows. Entities classify transfers between cash and restricted cash as operating, investing, or financing activities, or as a combination of those activities, on the statement of cash flows. 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.
To address this diversity in practice, the Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU), Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). If finalized, this proposed ASU would require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
The proposed ASU is available for comment until June 27, 2016.