Alert: FASB Accounting Standards Update No. 2016-18 - Statement of Cash Flows: Restricted Cash

Category: US GAAP

Alert: FASB Accounting Standards Update No. 2016-18 - Statement of Cash Flows: Restricted Cash

On November 17, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The ASU seeks to reduce the diversity in practice by providing guidance on the classification and presentation of changes in restricted cash on the statement of cash flows. Particularly, clarifications are made to highlight the appropriate treatment for:

  • Transfers between cash, cash equivalents and restricted cash.
  • Direct cash receipts into/payments made from a restricted cash bank account.

This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and restricted cash or restricted cash equivalent accounts. Therefore, 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. Receipts and payments of, and transfers in or out of, restricted cash are part of an entity’s cash management activities rather than its operating, investing and financing activities.

The amendments are effective as follows:

  • Public business entities – fiscal years beginning after December 15, 2017, including interim periods therein.
  • All other entities – fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.

Earlier adoption is allowed for all entities, including adoption in an interim period. If early adopting in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this ASU should be applied using a retrospective transition method to each period presented.

To access the full script of ASU No. 2016-18, click here.

This communication contains a general overview of the topic and is current as of December 30, 2016. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2016. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.