How does restricted cash affect my company?

If your Company has restricted cash, FASB has issued an Accounting Standards Update (“ASU”), which will affect your financial statement presentation.

Restricted Cash

ASU 2016-18 Statement of Cash Flows (Topic 230) focuses on restricted cash and its classification within the Statement of Cash Flows. Before this update, restricted cash was not required to be presented in one particular section of the Statement, and transfers between cash and restricted cash could be presented differently between various companies.

This ASU simplifies the presentation by clarifying that cash and restricted cash should be presented together on the Statement of Cash Flows in reconciling beginning of year and end of year Cash. However, on the Balance Sheet, restricted cash should still be presented separately from Cash.

How should cash be presented on the financial statement?

Please note that Cash and Restricted Cash may also include Cash Equivalents. They should be segregated on the balance sheet the same as their cash components and combined with Cash and Restricted Cash on the Statement of Cash Flows.

Disclosures

There are also disclosures required for the ASU, in which the nature of the restrictions must be disclosed. Cash and restricted cash must also be summarized in order to reconcile them from the balance sheet to the statement of cash flows.

ASU 2016-18 is effective for non-public entities with fiscal years beginning after December 15, 2018.

If you need more clarification on how the FASB issued Accounting Standards Update – ASU 2016-18 affects you, call LSL CPAs today at (714) 569-1000.


Richard Kikuchi

Focusing primarily on governmental clients, Rich oversees audits and strategic consulting to various entities, including cities and special districts. His favorite clients call him with financial or operational questions to support their long-term strategic planning. You can reach Rich at 714-672-0022. Read Rich's full bio.