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Reporting activity in the statement of cash flows is predicated on the cash method of accounting rather than the accrual method used for other financial statements. Accordingly, all debits and credits to a bank account that has the general characteristics of an unrestricted demand deposit or a restricted deposit account should be reported as cash outflows and cash inflows. FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises, explains:

Excerpt from FASB Concepts Statement No. 5

Reporting cash flows involves no estimates or allocations and few judgments except regarding classification in cash flow statements.

CON 5 further indicates that cash flows should be recognized when they occur. Accordingly, reporting entities should generally only report cash flows that actually affected cash and cash equivalents (see FSP 6.8.1 for a discussion of constructive receipts and disbursements). Cash and cash equivalents may be found in multiple financial statement line items, such as cash and cash equivalents, and restricted and other segregated cash and cash equivalents. A statement of cash flows should not reflect cash flows that could have happened or are expected to happen.
Question FSP 6-1 addresses the reporting of an acquisition of a long-lived asset prior to the remittance of payment.
Question FSP 6-1
How should a reporting entity report the acquisition of a long-lived asset in the financial statements if it has not remitted payment at the end of the reporting period?
PwC response
Prior to remittance of payment, the acquisition of a long-lived asset is a noncash investing activity. The reporting entity's statement of cash flows should not include an investing outflow for the acquisition of the long-lived asset. Payable amounts for the purchase of long-lived assets are not included in the reconciliation of net income to cash flows from operating activities. When the payable is paid, that amount is classified as an investing cash outflow. The fact that the reporting entity has sufficient cash to settle the accounts payable on the balance sheet date, or expects to pay the accounts payable shortly after the balance sheet date is irrelevant.

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