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Handbook: Statement of cash flows

Handbooks | February 2023

Latest edition: Our comprehensive guide to the statement of cash flows, with Q&As and examples to explain key concepts.

We explain cash flow classification issues and noncash disclosure requirements in detail. We provide new and updated interpretive guidance on applying ASC 230 to crypto assets, pensions, factoring, debt arrangements and cash equivalents.


ASC 230

  • All companies

Relevant dates

  • Effective immediately

A statement of importance

The statement of cash flows is a central component of an entity’s financial statements. Potentially misunderstood and often an afterthought when financial statements are being prepared, it provides key information about an entity’s financial health and its capacity to generate cash.

The underlying principles in Topic 230 (Statement of Cash Flows) seem straightforward. Cash flows are classified as either operating, financing or investing activities depending on their nature. But identifying the appropriate activity category for the many types of cash flows can be complex and regularly attracts SEC scrutiny. The composition of cash and cash equivalents also often raises questions.

This complexity is compounded by the fact that every transaction recorded through the financial statements needs to be assessed for its impact on the statement of cash flows. This is even true for transactions that do not involve cash. Yet, there has not been significant standard setting in this area since 2016 when the EITF clarified a series of classification issues and changed the presentation of restricted cash and cash equivalents. Therefore, diverse presentation practices remain.

Against that backdrop, the statement of cash flows is coming into the spotlight again. As the FASB and SEC focus on providing evermore useful information to financial statement users, they have specifically mentioned the statement of cash flows as a way to provide that information. Rather than waiting for scrutiny this is a good time for entities to revisit the ‘how-tos’ in preparing the statement of cash flows.

This Handbook provides an in-depth look at statement of cash flows classification issues and noncash disclosure requirements. We’ve organized it by transaction type, making it easier to identify the answers to the common and not so common questions that you may have. And for practical issues where the guidance remains unclear, we offer our position on how to classify many of these cash flows. 

Report contents

  • Recent ASUs
  • Objective and scope
  • Format of the statement
  • Classification principles
  • Interim reporting
  • Cash, cash equivalents and restricted cash
  • Working capital accounts
  • PP&E and other productive assets
  • Investments
  • Securitization and other transfers of financial assets
  • Lending activities
  • Debt financing transactions for debtors
  • Derivative instruments
  • Leases – ASC 842
  • Leases – ASC 840
  • Employee benefit plans
  • Share-based payment arrangements
  • Insurance premiums and proceeds
  • Business combinations
  • Transactions with shareholders
  • Discontinued operations
  • Foreign currency matters
  • NFP entities
  • Other cash flow presentation matters

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Statement of cash flows

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Valerie Boissou
Partner, Dept. of Professional Practice, KPMG US

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