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Generally, information about the gross amounts of cash receipts and cash payments during a period is more relevant than information about the net amounts of cash receipts and payments. Accordingly, ASC 230 emphasizes gross, rather than net, cash flows. However, netting cash flows in certain circumstances (e.g., receipts and repayments of certain short-term borrowings, certain hedges and items being hedged, and certain cash receipts and cash payments of banks, savings institutions, and credit unions) is permitted. Account balances and transactions should be thoroughly evaluated to determine whether the related cash flows should be presented on a gross or net basis. As discussed in  ASC 230-10-45-8 and ASC 230-10-45-9, items that qualify for net reporting must have quick turnover, occur in large volumes, and have short maturities (i.e., less than 90 days).
Examples that typically qualify for net reporting include:
  • Cash receipts and payments pertaining to trading investments, classified within operating activities
  • Balance sheet items in which a reporting entity is substantively holding or disbursing cash on behalf of its customers (e.g., customer demand deposits of a bank and customer accounts payable of a broker-dealer)
  • Debt (asset or liability) that has an original maturity of three months or less. Items that are due on demand are considered to have maturities of three months or less even though they may remain outstanding for longer periods.
  • Net borrowings under a revolving line of credit if the credit arrangement requires the borrower to sign a series of notes having a maturity of 90 days or less. However, it would not be appropriate to present the net change for a revolving line of credit that utilizes notes with a term of more than three months.
Reporting entities that participate in securities lending arrangements may receive cash as collateral. When a reporting entity holds collateral for 90 days or less, net presentation may be appropriate, because the financing is considered short-term. In such instances, the overall change in all collateral balances during the reporting period may be shown on a net basis in financing activities. By analogy, ASC 230-10-45-9 provides additional support for presenting these types of short-term lending arrangements on a net basis. The cash flows must otherwise be shown on a gross basis (i.e., separate line items of “Repayments of securities lending program” and “Proceeds from securities lending program”).
ASC 942-230-45-1 permits banks, savings institutions, and credit unions to present the following cash flows on a net basis:
  • Certain cash flows for deposits placed with other financial institutions and withdrawals of deposits
  • Time deposits accepted and repayments of deposits
  • Loans made to customers and principal collections
This provision is not available to finance companies, insurance companies, or other financial intermediaries.
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