New Reporting Requirements for Restricted Cash

New Reporting Requirements for Restricted Cash

Written by Brittany Leonard

February 17, 2020

In November 2016, the Financial Accounting Standards Board (FASB) issued Statement of Cash Flows – Restricted Cash (ASU 2016-18), to clarify how cash and cash equivalents and restricted cash and cash equivalents are presented in the statement of cash flows. Because there was no previous specific guidance there had been much diversity in how these cash items were being reported on the statement of cash flows. The standard is effective for all Organizations for fiscal years beginning after Dec. 15, 2018, which would be Dec. 31, 2019, for a calendar year Organization and fiscal year end 2020 for a fiscal year end Organization. If prior periods are presented on the statement of cash flows in the year of implementation, the prior period should be reclassified to conform to the new presentation.

The new standard will not change the current accounting for restricted cash and cash equivalents, but you will notice a change in the upcoming year in how these items are reported on the statement of cash flows and footnotes for your Organization, including:

The presentation of cash inflows and outflows related to restricted cash and cash equivalents.
Additional disclosures.

The new standard will require your Organization to include restricted cash or cash equivalents with the beginning and ending cash and cash equivalents on your statement of cash flows. The restricted cash and cash equivalents inflows and outflows will be presented separately as operating, investing or financing based on the nature of the activity whenever the total of an Organization’s cash and cash equivalents (restricted and unrestricted) is affected. The additional disclosures will require your Organization to describe the nature of the restrictions on restricted cash and cash equivalents in narrative form. Furthermore, if your Organization is reporting cash items in more than one line on the statement of financial position you will be required to include a reconciliation of each line item to the total cash and cash equivalents presented on the statement of cash flows.

There is some flexibility in reporting the above items on the face of the statement of cash flows or in the notes to the financial statements. We will work with you on determining the best approach for the reporting of cash items in order to comply with the new standard.

If you have any questions in regards to how ASU 2016-18 will impact your Organization, please contact your Hawkins Ash CPAs representative.

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Brittany Leonard
I am an audit manager for Hawkins Ash CPAs. I focus on providing audit services to tax credit projects, educational agencies, municipalities, nonprofit organizations, commercial enterprises, and housing authorities.

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