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FASB moves to standardize cash flow statements

The proposal addresses 8 issues for all entities.

Please note: This item is from our archives and was published in 2016. It is provided for historical reference. The content may be out of date and links may no longer function.

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A FASB proposal is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.

All entities would be affected by the proposed amendments, which are described in Proposed Accounting Standards Update, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.

The proposal, a consensus of FASB’s Emerging Issues Task Force, addresses eight specific cash flow issues for which existing guidance does not exist or is unclear:

  • Debt prepayment or debt extinguishment costs.
  • Settlement of zero-coupon bonds.
  • Contingent consideration payments made after a business combination.
  • Proceeds from the settlement of insurance claims.
  • Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies.
  • Distributions received from equity-method investees.
  • Beneficial interests in securitization transactions.
  • Separately identifiable cash flows and application of the predominance principle.

The full document is available at FASB’s website, where comments will be accepted through March 29.