A statement of cash flows explains the change during the period in cash, cash equivalents, and restricted cash. It is required for each period for which a statement of activities is presented.

Both NFPs and business entities prepare their cash flow statements in accordance with ASC 230-10, Statement of Cash Flows, using the same classifications and definitions. ASC 230-10 requires that cash receipts and cash payments be classified according to their nature—whether they stem from operating, investing, or financing activities—and provides explicit definitions of operating, investing, and financing cash flows. ASC 230-10 and ASC 958-230, Not-for-Profit Entities – Statement of Cash Flows, provide cash flow reporting guidance specific to contribution transactions (see NP 4.5).

Entities can present cash flows from operations using either the direct or indirect method. Although ASC 230 suggests that the direct method is preferable, most entities use the indirect method in which operating cash flows are derived by making adjustments to the total change in net assets (or net income for business entities). Investing and financing activities that affect recognized assets or liabilities but do not result in cash receipts or payments—for example, entering into a financing lease or purchasing fixed assets in exchange for a note payable—are required to be disclosed either on the face of the cash flow statement or in the notes.