ASU 2016-18 Statement of Cash Flows will be CPA Exam testable January 2018

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.

It’s important to be aware of standards updates that could impact how you answer the questions on the CPA Exam within that topic. Since exam material could conceivably change from one exam testing window to another, turn to Surgent for the latest updates. Our CPA review team stays informed of all authoritative and pronouncement changes and ensures you’ll receive the news as soon as we do!