A Roadmap to the Preparation of the Statement of Cash Flows

A Roadmap to the Preparation of the Statement of Cash Flows

May 2020

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Publications in Deloitte's Roadmap Series

Business Combinations Business Combinations -- SEC Reporting Considerations Carve-Out Transactions Comparing IFRS Standards and U.S. GAAP Consolidation -- Identifying a Controlling Financial Interest Contingencies and Loss Recoveries Contracts on an Entity's Own Equity Convertible Debt Current Expected Credit Losses Disposals of Long-Lived Assets and Discontinued Operations Distinguishing Liabilities From Equity Earnings per Share Environmental Obligations and Asset Retirement Obligations Equity Method Investments and Joint Ventures Equity Method Investees -- SEC Reporting Considerations Fair Value Measurements and Disclosures Foreign Currency Transactions and Translations Income Taxes Initial Public Offerings Leases Noncontrolling Interests Non-GAAP Financial Measures Revenue Recognition SEC Comment Letter Considerations, Including Industry Insights Segment Reporting Share-Based Payment Awards Statement of Cash Flows

Acknowledgments

We are grateful for the thoughts and contributions of Adrian Mills, Joe DiLeo, and Matthew Sibert. Teri Asarito, Sandy Cluzet, Amy Davidson, Joseph Renouf, and Lora Spickler-Alot delivered the first-class editorial and production effort that we have come to rely on. Dennis Howell supervised the overall preparation of this Roadmap and extends his deepest appreciation to all professionals who helped in its development.

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Contents

Prefaceviii

Contactsx

Chapter 1 -- Overview

1

Chapter 2 -- Scope

2

Chapter 3 -- Format and Presentation

4

3.1Form and Content of the Statement of Cash Flows

4

3.2Gross and Net Cash Flows

6

3.2.1Situations in Which Net Presentation May Be Appropriate

7

3.3Presentation of Discontinued Operations

8

Chapter 4 -- Cash and Cash Equivalents

12

4.1Definition of Cash and Cash Equivalents

12

4.1.1Restricted Cash

13

4.1.1.1Balance Sheet Presentation of Restricted Cash

13

4.1.1.2Presentation of Restricted Cash in the Statement of Cash Flows

14

4.1.1.3Reconciliation of Cash, Cash Equivalents, and Amounts Generally Described as

Restricted Cash or Restricted Cash Equivalents for an Interim Reporting Period

16

4.1.2Classification of Interest Earned on Restricted Funds

16

4.2Book and Bank Overdrafts

17

4.2.1Balance Sheet Considerations

17

4.2.1.1Book Overdrafts

17

4.2.1.2Bank Overdrafts

19

4.2.2Considerations Related to the Statement of Cash Flows

19

4.3Centralized Cash Management Arrangements ("Cash Pools")

19

4.4Money Market Funds

21

4.5Variable-Rate Demand Notes

22

4.6Auction Rate Securities

23

4.7Credit and Debit Card Receivables

23

Chapter 5 -- Noncash Investing and Financing Activities

24

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Deloitte | A Roadmap to the Preparation of the Statement of Cash Flows (2020)

Chapter 6 -- Classification of Cash Flows

26

6.1Investing Activities

26

6.1.1Securities Lending

27

6.1.2Distributions From Equity Method Investments

28

6.1.3Property, Plant, and Equipment Acquired on Account

30

6.1.4Securities

32

6.1.4.1Debt Securities

32

6.1.4.2Equity Securities

33

6.1.5Company- and Bank-Owned Life Insurance Policies

33

6.2Financing Activities

34

6.2.1Debt Extinguishments and Modifications

35

6.2.2Transactions With Noncontrolling Interest Holders

36

6.2.3Debt Issue Costs

37

6.2.4Advance Payments Received From Customers

37

6.3Operating Activities

38

6.3.1Long-Term Trade Receivables

39

6.3.2Cash Proceeds From Insurance Claims

40

6.3.3Planned Major Maintenance

40

6.3.4Employee Benefit Plans

41

6.4More Than One Class of Cash Flows

42

6.4.1Classification of Cash Flows for Emission Allowances and Related Transactions

45

6.4.2Classification of Cash Flows of Repayments of Zero-Coupon Bonds and Other Debt

Instruments With Coupon Interest Rates That Are Insignificant in Relation to the

Effective Interest Rate of the Borrowing

46

6.4.3Debt Instruments That Contain Interest Payable in Kind

50

6.5Changes to Historical Classification

51

Chapter 7 -- Common Issues Related to Cash Flows

52

7.1Foreign Currency Cash Flows

52

7.2Constructive Receipt and Disbursement

53

7.3Stock Compensation

54

7.3.1Cash Received Upon Early Exercise of a Share-Based Payment Award

55

7.3.2Income Tax Effects of Share-Based Payment Awards

55

7.3.3Settlement of Equity-Classified Share-Based Payment Awards

55

7.3.4Settlement of Liability-Classified Share-Based Payment Awards

56

7.3.5Remittances of Minimum Statutory Withholding on Share-Based Payment Awards

57

7.4Derivatives

58

7.4.1Hedging Derivatives

58

7.4.2Nonhedging Derivatives

59

7.4.3Other Nonhedging Derivatives

60

7.5Business Combinations

61

7.5.1Presentation of Acquisition-Related Costs

62

7.5.2Settlement of Acquired Liabilities After a Business Combination

62

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