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New Cash Flow Statement Classification Guidance Issued

The Financial Accounting Standards Board has issued new guidance to address how specific cash receipts and payments are classified in cash flow statements. The amendments in Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, cover the following cash flow issues:

  • Debt prepayment or debt extinguishment costs
  • Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant concerning the effective interest rate of the borrowing
  • Contingent consideration payments made following a business combination
  • Proceeds from the settlement of insurance claims
  • Proceeds from the settlement of corporate-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

Public entities must adopt the amendments for fiscal years, and interim periods within, starting after December 15, 2017. All other entities must adopt the amendments for fiscal years starting after December 15, 2018, and interim periods within fiscal years starting after December 15, 2019.

Early adoption of ASU No. 2016-15 is permitted. Entities should apply the amendments with a retrospective transition method.

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