Citing the need to address divergence in the way restricted cash is classified and presented, FASB issued Accounting Standards Update (ASU) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.
The amendments in the update require that a statement of cash flows explain the change during a reporting period in the total of cash, cash equivalents, and amounts generally described as restricted cash and restricted cash equivalents. The update does not define restricted cash.
The amendments apply to entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under FASB Accounting Standards Codification Topic 230. The amendment says that transfers between cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents are not part of the entity's operating, investing, and financing activities.
No specific guidance currently exists in GAAP about cash flow classification and presentation of changes in restricted cash or restricted cash equivalents, according to the ASU.
The amendments take effect for public business entities for fiscal years beginning after Dec. 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments take effect for fiscal years beginning after Dec. 15, 2018, and interim periods within fiscal years beginning after Dec. 15, 2019.
Early adoption is permitted, including adoption in an interim period. If an entity early adopts the standard in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period.