8.4 Statement of Cash Flows Presentation

While noncontrolling interests are typically thought of as representing a third party’s claim on the net assets of a consolidated subsidiary, unless a transaction is specifically with a noncontrolling interest holder, it is not possible to identify the portion of an individual asset (e.g., cash) that is attributable to a noncontrolling interest. Accordingly, the statement of cash flows does not require differentiation, on its face, between cash flows attributable to controlling and noncontrolling interests. Instead, consolidated net income is the starting point for both (1) a reporting entity’s statement of cash flows prepared under the indirect method and (2) a reporting entity’s reconciliation to net income in a statement of cash flows prepared under the direct method.

Distributions to noncontrolling interest holders (in their capacity as equity holders) are considered equity transactions and should be reflected as cash outflows for financing activities in accordance with ASC 230-10-45-15. Entities that determine that it is appropriate to classify the cash outflows associated with these distributions outside of financing activities in the statement of cash flows are encouraged to consult with their professional accounting advisers.

See Section 7.1.2.9 of this Roadmap and Section 6.2.2 of Deloitte’s Roadmap Statement of Cash Flows for additional discussion, including the classification of costs associated with purchasing or selling noncontrolling interests in a subsidiary.