Statement of Cash Flows (Topic 230) Classification of ...

No. 2016-15 August 2016

Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and

Cash Payments

a consensus of the FASB Emerging Issues Task Force

An Amendment of the FASB Accounting Standards Codification?

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Accounting Standards Update

No. 2016-15 August 2016

Statement of Cash Flows (Topic 230)

Classification of Certain Cash Receipts and Cash Payments

An Amendment of the FASB Accounting Standards Codification?

Financial Accounting Standards Board

Accounting Standards Update 2016-15

Statement of Cash Flows (Topic 230)

Classification of Certain Cash Receipts and Cash Payments

August 2016

CONTENTS

Page Numbers

Summary ...........................................................................................................1?5 Amendments to the FASB Accounting Standards Codification? .....................7?29 Appendix: Paragraphs Amended by Multiple Issues .....................................30?34 Background Information and Basis for Conclusions ......................................35?48 Amendments to the XBRL Taxonomy .................................................................49

Summary

Why Is the FASB Issuing This Accounting Standards Update (Update)?

Stakeholders indicated that there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.

Who Is Affected by the Amendments in This Update?

The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230.

What Are the Main Provisions?

The amendments in this Update provide guidance on the following eight specific cash flow issues:

Cash Flow Issue

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

Summary of Amendments

Cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities.

At the 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, the issuer should classify the portion of the cash payment attributable to the accreted interest related to the debt discount as cash outflows for operating activities, and the portion of the cash payment attributable to the principal as cash outflows for financing activities.

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Cash Flow Issue 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

Summary of Amendments

Cash payments not made soon after the acquisition date of a business combination by an acquirer to settle a contingent consideration liability should be separated and classified as cash outflows for financing activities and operating activities. Cash payments up to the amount of the contingent consideration liability recognized at the acquisition date (including measurement-period adjustments) should be classified as financing activities; any excess should be classified as operating activities. Cash payments made soon after the acquisition date of a business combination by an acquirer to settle a contingent consideration liability should be classified as cash outflows for investing activities.

Cash proceeds received from the settlement of insurance claims should be classified on the basis of the related insurance coverage (that is, the nature of the loss). For insurance proceeds that are received in a lumpsum settlement, an entity should determine the classification on the basis of the nature of each loss included in the settlement.

Cash proceeds received from the settlement of corporate-owned life insurance policies should be classified as cash inflows from investing activities.

The cash payments for premiums on corporate-owned policies may be classified as cash outflows for investing activities, operating activities, or a combination of investing and operating activities.

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