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 Concept Statement No. 5
- ASC 320, Investments — Debt and Equity Securities
- ASC 718, Compensation — Stock Compensation
- ASC 815, Derivatives and Hedging
- ASC 830, Foreign Currency Matters
In addition, certain reporting entities should consider industry specific guidance as follows:
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 that is subject to the registration and regulatory requirements of the Investment Company Act of 1940 (the 1940 Act), or that has essentially the same characteristics by meeting 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) in relation 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
- A defined benefit or defined contribution postretirement plan
In August of 2019, the FASB issued ASU 2018-15
, Intangibles-Goodwill and Other Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.
This ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in ASC 350-40
to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The amendments also require the entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element, which would typically be operating cash flows. This is codified at ASC 350-40-45-3
The amendments are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.
In March of 2019, the FASB issued ASU 2019-01
, Leases (Topic 842): Codification Improvements.
This ASU includes guidance on the presentation of principal payments received by financial services depository and lending entities as lessors that are within the scope of ASC 942
. Such principal payments on sales-type leases and direct financing leases would be classified as cash inflows from investing activities.
The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years for a public business entity. For all other entities, the effective date is years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
In March 2019, the FASB issued ASU 2019-02
, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment Broadcasters-Intangibles-Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials.
This ASU adds ASC 920-230
and provides guidance to a broadcaster licensee on the classification in the statement of cash flows of certain costs incurred under a license agreement for program materials.
A broadcaster licensee shall report cash outflows for the costs incurred to obtain the rights acquired under a license agreement for program material as operating activities in the statement of cash flows, and it shall include the amortization of the capitalized costs of license agreements for program material in the reconciliation of net income to net cash flows from operating activities.
For public business entities, the guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied prospectively. Under prospective transition requirements, an entity should apply the amendments at the beginning of the period that includes the adoption date.