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Lesson details
- Estimated study time
- 110 min
Learning objectives (4)
ASU 2016-18 changed the reconciliation surface: the statement explains the change in a combined amount that generally includes cash, cash equivalents, restricted cash, and restricted cash equivalents. It did not define restricted cash. The entity still needs a supported restriction analysis and policy.
Build the location bridge
At each reporting date, list the included amount by balance-sheet caption and account. Explain the nature of material restrictions and reconcile the location totals to the statement population. If cash is presented in more than one line, the note should let a reader reproduce the combined amount.
| Location | Beginning | Ending | Restriction evidence | Population status |
|---|---|---|---|---|
| Cash and equivalents | amount | amount | unrestricted operating accounts | included |
| Other current assets | amount | amount | payroll or escrow terms | supported conclusion |
| Other noncurrent assets | amount | amount | long-term covenant reserve | supported conclusion |
The bridge is not an activity section. It answers where the population appears at two dates.
Eliminate transfers within the population
When an entity transfers $5 million from an unrestricted operating account to an included restricted account, one location falls and another rises. The combined population does not change. Do not report an investing outflow, an operating inflow, or any other activity-section pair. Retain both bank movements in the evidence ledger, link them with one transfer ID, and eliminate them from the statement sections.
This treatment differs from a direct payment to an external counterparty from a restricted account. That payment changes the combined population and is classified according to the nature of the underlying activity. “Restricted” describes availability or location; it does not assign an operating, investing, or financing section.
For example, a $2 million payment from the restricted account to a construction contractor reduces both that location and the combined population by $2 million. Under a supplied capital-asset conclusion, the payment is investing. The restriction did not choose the section; the external asset acquisition did.
Control population changes
Investigate additions and removals from the population separately from transfers within it. A changed legal restriction, matured instrument, acquired entity, disposed entity, or revised unsupported policy can alter the bridge, but the accounting analysis must explain why. Do not plug a population-policy change into a cash-flow section merely to force the rollforward.
Require three independent ties: ledger accounts to the location bridge, location bridge to the combined beginning and ending totals, and combined totals to classified cash flows plus the separate exchange-rate effect. A pass on one does not excuse a failure on another.