As a consensus from the Emerging Issues Task Force (EITF), the FASB recently released changes to the presentation and disclosure of restricted cash. A project contemplating improvements to the cash flow statement has been on the EITF agenda for quite some time. The portion of the cash flow statement improvements project related to restricted cash was broken out of a larger project due to the challenges with reaching a consensus.

1. MAYER HOFFMAN MCCANN P.C. – AN INDEPENDENT CPA FIRM
MHMMessenger
877-887-1090 | www.mhmcpa.com | @mhm_pc Mayer Hoffman McCann P.C.
TM
Copyright ©2016, Mayer Hoffman McCann P.C. All rights Reserved.
MHM (Mayer Hoffman McCann P.C.) is an independent CPA firm that is a member firm of Kreston International Limited, a global network of independent accounting firms.
A publication of the Professional Standards Group
November 2016
Presentation Changes to the Cash Flow Statement
As a consensus from the Emerging Issues Task Force
(EITF), the Financial Accounting Standards Board
(FASB) recently released changes to the presentation
and disclosure of restricted cash.
A project contemplating improvements to the cash
flow statement has been on the EITF agenda for quite
some time. The portion of the cash flow statement
improvements project related to restricted cash was
broken out of a larger project due to the challenges
with reaching a consensus. Accounting Standard
Update 2016-18, Statement of Cash Flows (Topic 238):
Restricted Cash clarifies that entities should report
restricted cash and restricted cash equivalents along
with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. Although the
EITF decided to not define the terms restricted cash
and restricted cash equivalents, it did conclude that
entities should disclose the nature of the restrictions
on cash and cash equivalents. When cash, cash
equivalents and restricted cash and restricted cash
equivalents are included in multiple line items on
the balance sheet, disclosure will be required. The
disclosures should include the amounts, separated
by line items, and the sum of the total amount of cash,
cash equivalents, restricted cash and restricted cash
equivalents in either a narrative format or a table.
Making the accounting change will address the
diversity in current practice, where entities classify
transfers between cash and restricted cash as some
combination of financing, investing and operating
activities. Others present activities involving bank
accounts with restricted cash as cash inflows and
cash outflows. Some entities present those same
activities as noncash investing or financing activities.
The new guidance clarifies that transfers between
cash, cash equivalents, restricted cash and restricted
cash equivalents are not to be described as operating,
investing or financing activities because those
activities are not reported as cash flow activities in
the statement of cash flows.
Amendments will be effective for public business
entities for fiscal years, and interim periods within,
beginning after December 15, 2017 (2018 calendar
year). All other entities will adopt for annual periods
beginning after December 15, 2018 (2019 calendar
year) and interim periods within annual periods
beginning after December 15, 2019).
For more information about how the changes will
affect your company, please contact Mark Winiarski
of MHM’s Professional Standards Group. Mark can
be reached at mwiniarski@cbiz.com or 816.945.5614.
The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please
contact your MHM auditor to further discuss the impact on your audit or audit report.