Industry Insights

Clarification Proposed on Classification of Certain Cash Receipts & Payments

February 2016

Executive Summary

Proposed Accounting Standards Update (ASU), Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force), is expected to decrease diversity in practice by providing classification guidance on seven targeted transaction types and clarifying when an entity should separate multiple cash flows or aggregate them into one class. The amendments address:

  • Cash payments for debt prepayment or debt extinguishment costs
  • Cash payments at settlement of zero-coupon bonds
  • Cash payments made by an acquirer, if not paid soon after a business combination occurred, for the settlement of a contingent consideration liability
  • Proceeds received from settlement of insurance claims (excluding proceeds received from corporate-owned and bank-owned life insurance policies)
  • Proceeds received from settlement of corporate-owned life insurance policies, including bank-owned life insurance policies
  • Distributions received by an investor from equity-method investees
  • Payments on transferor’s beneficial interest in securitized trade receivables

The guidance would apply to business and not-for-profit entities required to present a statement of cash flows under Topic 230. The effective date and ability to adopt early will be determined after consideration of feedback, which is due March 29, 2016.


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