News & Events

Restricted Cash & The Statement of Cash Flows

– by Linda Marie Pearson, CPA, CFE

Restricted Cash

Financial Accounting Standards Board (FASB) has recently amended the FASB Accounting Standards Codification (ASC) related to the presentation of restricted cash on the statement of cash flows. FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230) to communicate how the ASC was amended. Here are the highlights of the change:

Main Provisions to the Current Recognition Method In preparing the statement of cash flows, the change during the period in cash is to represent the total change 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 should 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.
Effective Date  

[For all entities other than public business entities] For fiscal years beginning after December 15, 2018.  Early application is permitted.

Who is Affected?  

All entities with restricted cash presenting a statement of cash flows.

Prior to the Amendment  

Previously, there was a lack of specific guidance to the presentation of restricted cash in the statement of cash flows.

Main Provisions

 

  • Descriptive terms shall be used such as: cash, cash and cash equivalents.
  • Disclosures to be included to reconcile the cash presenting in the statement of cash flows to that presented in the balance sheet, if necessary (either on the Statement of Cash Flows or in the Notes to the Financial Statements).
  • The Statement of Cash Flows will not report the details of transfers between cash and restricted cash.
Implementing Retrospective approach

For the complete ASU, click [here].

Please contact Linda Pearson, CPA, CFE, Principal at 401-752-0566 to discuss how ASU 2016-18 will affect your organization.