The principles of reporting cash flows are contained in ASC 230, Statement of Cash Flows; however, ASC 230 is not a comprehensive source of authoritative guidance. The following list contains additional sources for guidance governing the statement of cash flows:
  • FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting
  • ASC 320, Investments — Debt and Equity Securities
  • ASC 350-40, Internal-Use Software
  • ASC 350-60 Intangibles – Goodwill and Other – Crypto Assets
  • ASC 815, Derivatives and Hedging
  • ASC 830, Foreign Currency Matters
In addition, certain reporting entities should consider industry-specific guidance as follows:

ASC 230 requires a statement of cash flows as part of a full set of financial statements for all reporting entities, except as noted below. The statement of cash flows is a primary financial statement and is required for each period for which an income statement (or statement of activities for not-for-profits) is presented. The statement of cash flows is also required to be presented in guarantor condensed consolidating information and parent company-only financial statements that include a balance sheet and an income statement. There are no exclusions for specific industries or different types of reporting entities except for:
  • An investment company as defined in ASC 946 that also meets the following conditions:
    • Substantially all of the assets of the reporting entity are carried at fair value and are classified as Level 1 or Level 2 under ASC 820, Fair Value Measurement, or are measured using the practical expedient in ASC 820-10-35-59 and are always redeemable in the near term
    • The reporting entity has little or no debt (based on the average debt outstanding during the period) relative to average total assets
    • The reporting entity provides a statement of changes in net assets
  • A common trust fund, variable annuity account, or similar fund maintained by a bank, insurance entity, or other entity in its capacity as a trustee, administrator, or guardian for the collective investment and reinvestment of moneys for a beneficiary
  • A defined benefit or defined contribution postretirement plan

New guidance
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU affects a variety of topics in the Codification, including ASC 230. It adds ASC 230-10-50-9, which requires the reporting entity to disclose its accounting policy for where cash flows associated with derivative instruments and their related gains and losses are presented. Consistent with the accounting policy disclosure requirements in ASC 235-10-50-1 through 235-10-50-2, the disclosure applies to annual reporting periods and the interim reporting period in which the reporting entity changes its accounting policies since the end of its preceding fiscal year.
For all entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the amendments are effective and applicable to financial statements issued after the date that the SEC’s removal of the related guidance from Regulation S-X or Regulation S-K becomes effective. For all other entities, the amendments are effective two years after that date. Early adoption is prohibited. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity.
The ASU should be applied prospectively.
In December 2023, the FASB issued ASU 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The cash flow presentation of in-scope crypto assets will generally follow the existing guidance in ASC 230. However, if crypto assets are received as noncash consideration in the ordinary course of business (e.g., settlement of receivables) and then “nearly immediately” converted into cash, the ASU specifically requires that the cash received be classified as an operating activity in the statement of cash flows. The ASU defines “nearly immediately” as a short period of time that is expected to be within hours or a few days, rather than weeks.
The ASU is effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance).
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