Search within this section
Select a section below and enter your search term, or to search all click Not-for-profit entities
Favorited Content
4.3 Cash, cash equivalents, and restricted cash
Publication date: 27 May 2020
us NFP guide
The cash flow statement details changes in an entity’s cash, cash equivalents, and restricted cash by reconciling the beginning and ending totals of all such amounts for the period. ASC 230-10 does not define restricted cash; instead, it refers to "amounts generally described as" restricted cash or restricted cash equivalents. For general information on what qualifies as cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents, see FSP 6.5.
As discussed in ASC 958-230-55-2, restrictions or constraints on an NFP’s ability to withdraw or use cash and cash equivalents can cause those resources to be classified as noncurrent in the balance sheet (or in an unclassified balance sheet, sequenced apart from and below cash and cash equivalents used in operations). Despite being classified apart from cash and cash equivalents on the balance sheet, our view is that these amounts represent restricted cash or restricted cash equivalents and therefore are subject to inclusion in beginning and ending cash in the statement of cash flows.
Not all assets of NFPs that meet the definition of cash equivalents are cash equivalents for purposes of preparing statements of financial position and cash flows. Restrictions can prevent them from being included as cash equivalents even if they otherwise qualify. For example, short-term highly liquid investments are not cash equivalents if they are purchased with resources that have donor-imposed restrictions that limit their use to long-term investment.
All cash—regardless of its location on the balance sheet and any restrictions placed on its use—must be included in the beginning and ending totals. The beginning and ending totals must also include any short-term, highly-liquid investments that are defined as cash equivalents under an entity’s accounting policy, including those that are subject to restrictions. As discussed in ASC 230-10-45-6, because not all investments that might qualify as cash equivalents under the ASC Master Glossary definition are required to be classified as such, entities must establish and disclose a policy identifying which investments are treated as cash equivalents for financial reporting purposes.
Not all investments that qualify are required to be treated as cash equivalents. An entity shall establish a policy concerning which short-term, highly liquid investments that satisfy the definition of cash equivalents are treated as cash equivalents. For example, an entity having banking operations might decide that all investments that qualify except for those purchased for its trading account will be treated as cash equivalents, while an entity whose operations consist largely of investing in short-term, highly liquid investments might decide that all those items will be treated as investments rather than cash equivalents
Similar to the example in ASC 230-10-45-6, an NFP with an endowment or investment pool might establish a policy to report as cash equivalents all short-term, highly-liquid investments meeting the definition, except for such instruments that are purchased for its endowment or investment pool. In that case, the short-term, highly-liquid instruments held within the endowment or investment pool are accounted for as investments, rather than as cash equivalents. If the NFP had not made the election, the short-term, highly liquid investments would be considered cash equivalents or restricted cash equivalents and would be included in the beginning and ending totals in the statement of cash flows. See FSP 6.5.2 for further discussion of the accounting policy for defining cash equivalents.
According to ASC 230-10-50-8, when cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents are included in more than one line item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet must be provided either on the face of the statement of cash flows or in the notes to the financial statements. Entities must also disclose the nature of restrictions on their restricted cash and restricted cash equivalent balances, as required by ASC 230-10-50-7 and ASC 958-210-50-3.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Link copied
