Presentation of Restricted Cash in the Statement of Cash Flows

In its ongoing effort to reduce diversity in practice, the FASB issued an Accounting Standards Update (ASU) that addresses the presentation of restricted cash and restricted cash equivalents in the statement of cash flows and the related disclosures in the notes to the financial statements.

Presentation Requirements

The ASU clarifies that restricted cash and restricted cash equivalents should be included in the total cash and cash equivalents when reconciling the beginning and ending balances in the statement of cash flows. Transfers of cash and cash equivalents between the restricted and unrestricted classifications should not be presented in the statement of cash flows.

Disclosure Requirements

Entities must make the following disclosures in the notes to the financial statements:

• When cash, cash equivalents, restricted cash and restricted cash equivalents are disaggregated in the balance sheet, include a narrative or tabular reconciliation of the disaggregated amounts to the aggregated amount used in the statement of cash flows
• The nature of restrictions on cash and cash equivalent balances

Effective Dates

The guidance is effective for fiscal years beginning after 12.15.17 and interim periods within those fiscal years for public business entities and 12.15.18 for all others. Early adoption is permitted. If early adopted in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. Retrospective application is required.