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A roadmap to the preparation of the statement of cash flows

We are pleased to present the 2020 edition of A Roadmap to the Preparation of the Statement of Cash Flows. This Roadmap provides Deloitte’s insights into and interpretations of the accounting guidance on the statement of cash flows, primarily that in ASC 230. The 2020 update includes several new discussions as well as some modifications to previously expressed views.

We are pleased to present the 2020 edition of A Roadmap to the Preparation of the Statement of Cash Flows. This Roadmap provides Deloitte’s insights into and interpretations of the accounting guidance on the statement of cash flows, primarily that in ASC 230.1

The accounting principles related to the statement of cash flows have been in place for many years; however, errors in the statement of cash flows continue to be causes of restatements and registrants continue to receive comments from the SEC staff on cash flow presentation matters.

While ASC 230 provides some guidance on cash payments and receipts that are classified as either operating, investing, or financing activities, it does not provide consistent principles for evaluating the classification of certain cash payments and receipts in the statement of cash flows, which has led to diversity in practice. In recent years, the FASB issued ASU 2016-152 and ASU 2016-18,3 which clarified guidance in ASC 230 on the classification of certain cash flows and removed some of the diversity in practice. This Roadmap reflects the amendments to ASC 230 made by these ASUs and includes some of Deloitte’s interpretive views on them.

The Roadmap also incorporates interpretations and guidance related to the new leasing standard, ASU 2016-02 (codified in ASC 842; see Section 7.6). ASU 2016-02 amended the leasing guidance in US GAAP—notably by requiring lessees to recognize liabilities for lease payments and right-of-use assets—and became effective for calendar-year-end public business entities on January 1, 2019. In addition, in response to the global COVID-19 pandemic, the FASB issued a proposed ASU on April 21, 2020, that would (1) delay the effective date of ASC 606 for certain nonpublic entities by one year and (2) defer the effective date of ASC 842 to fiscal years beginning after December 15, 2021, for certain public business entities (e.g., public not-for-profit entities) and all nonpublic entities.

This Roadmap includes several new discussions as well as some modifications to previously expressed views. Appendix H highlights all new content as well as any substantive revisions to previous content.

1 For the full titles of standards, topics, and regulations, see Appendix F. For the full forms of acronyms, see Appendix G.

2 For public business entities, the guidance in ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities. However, an entity that early adopts ASU 2016-15 must adopt all of the ASU’s amendments. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively if retrospective application would be impracticable.

3 For public business entities, the guidance in ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods therein. For all other entities, it is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities, which must apply the guidance retrospectively to all periods presented.

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The Roadmap series contains comprehensive, easy-to-understand accounting guides on selected topics of broad interest to the financial reporting community.

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