On Nov. 17, 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. For public business entities, the amendments in this Update are effective for fiscal years beginning after Dec. 15, 2017, and will be eligible for testing on the CPA Examination in January 2018.
Currently there is no consistent approach to the classification and presentation of changes in restricted cash on the statement of cash flows. Entities classify transfers between cash and restricted cash as operating, investing, or financing activities, or as a combination of those activities. Additionally, some entities present direct cash transactions into and out of restricted cash bank accounts as cash inflows and cash outflows, while others disclose those cash flows as noncash investing or financing activities.
This Update requires that restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The statement must also explain the change during the period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents.
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