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Accounting Standards Changing Related to Cash Flows Reporting

January 29, 2019


The Statement of Cash Flows included in financial statements prepared in accordance with generally accepted accounting principles (GAAP) includes information that is very valuable, but often overlooked. Recently two accounting standards have been issued to improve the quality of the items presented.

One standard, FASB Accounting Standards Update (ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, changes how restricted cash is treated in the statement of cash flows by requiring that restricted cash and the related changes therein be included along with cash and cash equivalents when reconciling beginning and ending total cash, cash equivalents, and restricted cash during the accounting period. Consequently, the nature of the inflows and outflows from those accounts will have to be included in the body of the statement.

FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, addresses selected topics in how certain cash receipts and cash payments should be classified for the statement of cash flows including guidance related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from insurance claims settlements, proceeds from corporate-owned life insurance policy settlements, distributions from equity method investees, and other topics.

Both new standards are effective for public business entities generally starting in 2018 and for all other entities generally starting in 2019.