The opening and closing balances of cash and cash equivalents in the cash flow statement MUST always use the element that includes discontinued operations, when cash flows related to discontinued operations is included in the statement. This element can also be used if the company has no discontinued operations in a given period. The cash and cash equivalent balance, inclusive of discontinued operations, should not be used when the cash flow statement specifically excludes discontinued operations and the discontinued operations are disclosed separately in the notes. See 205-20-50-5B-C-1 .
The following example shows a situation where the element ” CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsIncludingDisposalGroupAndDiscontinuedOperations ” is used to identify the opening and closing balances on all three periods.
The cash flow statement should always use the same element to represent the opening and closing cash balances for all periods, irrespective of the cash element(s) used on the balance sheet.
The updated FASB standards, related to restricted cash, results in all movements in restricted cash during the period being included in the cash flow statement. Thus, the aggregate movement in restricted cash during the period should be included in the element “Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect”. The requirements in this section of the codification means that individual movements in restricted cash should not appear in the cash flow statement for companies that have adopted ASU-2016-18. The elements IncreaseDecreaseInRestrictedCash , DecreaseInRestrictedCash, and IncreaseInRestrictedCash should not appear in the movement of cash flows as they include the movements from restricted cash into cash and cash equivalents.
Cash, Cash Equivalents and Federal Funds Sold
Prior to the adoption of ASU-2016-18, financial institutions could include the values of federal funds sold in the opening and closing balance on the cash flow statement. Where these are incorporated in the opening and closing cash balances, the financial institution should use the element CashCashEquivalentsAndFederalFundsSold to represent the opening and closing balances in the cash flow statement. The element CashCashEquivalentsAndFederalFundsSold should not be used on the cash flow statement if the cash flow statement includes transactions representing the movement of these funds in the financing section of the cash flow statement such as:
- IncreaseDecreaseInFederalFundsPurchasedAndSecuritiesSoldUnderAgreementsToRepurchaseNet
- IncreaseDecreaseInFederalFundsPurchased
- ProceedsFromPaymentsForInSecuritiesSoldUnderAgreementsToRepurchase
After the adoption of ASU-2016-18, companies should include the element CashCashEquivalentsAndFederalFundsSold used on the balance sheet in the reconciliation between the balance sheet and the cash flow statement, and not as the opening and closing balance for the cash flow statement. The reconciliation will require a calculation linkbase that will indicate that federal funds sold are included in the opening balance of cash and cash equivalents on the cash flow statement.
Cash, Cash Equivalents and Short-Term Investments
Companies have used the element CashCashEquivalentsAndShortTermInvestments to represent the cash and cash equivalents on the balance sheet, and as the opening and closing element on the cash flow statement. In the example below, the company used this element to represent the total of short term investments and cash and due from banks.
This element CashCashEquivalentsAndShortTermInvestments, defined in the US GAAP taxonomy, represents cash and and short term investments with a maturity of a year or less. In the https://paydayloanstennessee.com/cities/morristown/ example above, the short term investments represents securities which fall due in 90 days and were purchased within 90 days of maturity. In this example, the company should have used the element CashAndCashEquivalentsAtCarryingValue on the balance sheet and the element CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents on the cash flow statement if they had adopted ASU-2016-18.
Reconciliation of Cash Flow Statement to the Balance Sheet
The elements included in the reconciliation of the cash flow statement to the balance sheet must be included in a calculation linkbase. The total balance of the reconciliation shown below must be one of the following elements and should also appear in the cash flow statement:
