a comprehensive guide statement of cash flows - a statement of cash flows shall report the cash...

Download A comprehensive guide Statement of cash flows - A statement of cash flows shall report the cash effects

Post on 20-Oct-2019

1 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

  • Financial reporting developments A comprehensive guide

    Statement of cash flows Accounting Standards Codification 230

    Revised October 2016

  • To our clients and other friends

    ASC 230, Statement of Cash Flows, addresses the presentation of the statement of cash flows. This

    publication is designed to assist professionals in understanding the statement of cash flows. This publication

    reflects our current understanding of this guidance based on our experience with financial statement

    preparers and related discussions with the staff of the FASB and SEC.

    This publication has been updated to reflect the issuance of ASU 2016-15, Classification of Certain Cash

    Receipts and Cash Payments, and other recent amendments to ASC 230 issued through October 2016.

    Refer to Appendix D for a summary of substantive updates to this publication.

    Ernst & Young professionals are prepared to help you identify and understand the issues related to the

    statement of cash flows.

    October 2016

  • Financial reporting developments Statement of cash flows | i

    Contents

    1 Overview and scope ................................................................................................... 1

    1.1 Overview ............................................................................................................................... 1

    1.2 Scope .................................................................................................................................... 2

    1.3 Effects of recent accounting standards updates....................................................................... 5

    2 Form and content ...................................................................................................... 7

    2.1 Definitions — cash and cash equivalents ................................................................................... 7

    2.1.1 Cash ............................................................................................................................. 7

    2.1.2 Cash equivalents ........................................................................................................... 7

    2.2 Application of cash equivalents guidance ................................................................................ 8

    2.2.1 Investments in equity securities ..................................................................................... 9

    2.2.2 Auction rate securities and variable rate demand obligations ........................................... 9

    2.2.3 Short-term paper ........................................................................................................ 10

    2.3 Gross vs. net cash flows ....................................................................................................... 10

    2.3.1 Revolving lines of credit ............................................................................................... 11

    2.3.2 Financial institutions ................................................................................................... 12

    2.4 Restricted cash and restricted cash equivalents ..................................................................... 13

    2.4.1 Assets donated to not for profits including those with restrictions .................................. 13

    3 Classification of cash flows ....................................................................................... 14

    3.1 Overview ............................................................................................................................. 14

    3.2 Investing activities ............................................................................................................... 14

    3.3 Financing activities .............................................................................................................. 17

    3.4 Operating activities .............................................................................................................. 20

    3.5 More than one class of cash flows (prior to the adoption of ASU 2016-15) .............................. 22

    3.5A More than one class of cash flows (following the adoption of ASU 2016-15) ........................... 23

    3.6 Common issues related to classification ................................................................................ 23

    3.6.1 Restricted cash and restricted cash equivalents ............................................................ 24

    3.6.2 Loans and trade receivables ........................................................................................ 24

    3.6.3 Securitized loans or trade receivables .......................................................................... 25

    3.6.4 Acquisitions and sales of certain securities ................................................................... 27

    3.6.5 Inventory financing by a captive finance subsidiary of the seller ..................................... 28

    3.6.6 Inventory purchases from a supplier financed by a subsidiary of the supplier (i.e., “floor plan” financing transactions) .......................................................... 28

    3.6.7 Distributions received from unconsolidated entities (including joint ventures) ................. 29

    3.6.8 Transactions with noncontrolling interest holders while control is maintained ................. 32

    3.6.9 Seller financed purchases ............................................................................................ 32

    3.6.10 Leases (prior to the adoption of ASU 2016-02)............................................................. 32

    3.6.10A Leases (following the adoption of ASU 2016-02) .......................................................... 33

    3.6.11 Business combinations ................................................................................................ 33

    3.6.12 Overdrafts .................................................................................................................. 35

    3.6.13 Settlement of pension liabilities .................................................................................... 35

  • Contents

    Financial reporting developments Statement of cash flows | ii

    3.6.14 Payment in kind interest (i.e., settlement of interest by issuing additional securities or restructuring debt) ................................................................................... 35

    3.6.15 Repurchase of shares from an employee to satisfy minimum tax withholding (prior to the adoption of ASU 2016-09) ...................................................... 36

    3.6.15A Repurchase of shares from an employee to satisfy minimum tax withholding (following the adoption of ASU 2016-09) ................................................... 36

    3.6.16 Excess tax benefit from share-based payment awards (prior to the adoption of ASU 2016-09) .......................................................................................... 36

    3.6.16A Excess tax benefit from share-based payment awards (following the adoption of ASU 2016-09) .......................................................................................... 37

    3.6.17 Cash flows related to hedging activities ........................................................................ 37

    3.6.18 Insurance claim proceeds (prior to the adoption of ASU 2016-15) ................................. 37

    3.6.18A Insurance claim proceeds (following the adoption of ASU 2016-15) ............................... 37

    3.6.19 Debt prepayment or extinguishment costs (following the adoption of ASU 2016-15) ...... 38

    3.6.20 Settlement of zero-coupon debt instruments (following the adoption of ASU 2016-15) .. 38

    3.6.21 Consideration of accrued capital expenditures .............................................................. 38

    3.7 Noncash investing and financing activity ............................................................................... 38

    3.7.1 Renewals of loans and deposits .................................................................................... 40

    3.7.2 Collections — not for profit entities ............................................................................... 40

    3.8 Cash flows from discontinued operations and extraordinary items .......................................... 40

    3.8.1 Extraordinary items (prior to the adoption of ASU 2015-01) ......................................... 42

    3.8.2 Income tax effects of discontinued operations and extraordinary items2 ........................ 42

    3.8.3 Discontinued operations (following the adoption of ASU 2014-08) ................................ 43

    3.9 Insurance company cash flow classification ........................................................................... 44

    3.9.1 Cash and cash equivalents ........................................................................................... 44

    3.9.2 Separate accounts ...................................................................................................... 44

    3.9.3 Presenting investing activities ...................................................................................... 44

    3.9.4 Universal life insurance ............................................................................................... 4

Recommended

View more >