On August 26, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU is in response to diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230. ASU 2016-15 applies to all for profit and not-for-profit entities that are required to present a statement of cash flows under Topic 230.
The amendments in this ASU provide guidance on the following specific cash flow items:
• Debt prepayment or debt extinguishment costs
• Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing
• Contingent consideration payments made after a business combination
• Proceeds from the settlement of insurance claims
• Proceeds from the settlement of corporate-owned life insurance policies, including bank-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
This ASU will be effective for public companies for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities (private and not-for-profit), the amendments in this ASU will be in effect for fiscal years beginning after Dec. 15, 2018, and interim periods within fiscal years beginning after Dec. 15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments in this ASU should be applied using a retrospective transition method to each period presented.
If you have any questions, concerns, or would like additional information on the aforementioned, please contact your HW&Co. Executive.