Chapter 1 — Overview | DART – Deloitte Accounting Research Tool

ASC 230 contains guidance on reporting cash flows in an entity’s financial statements. The primary objective for presenting a statement of cash flows under ASC 230 is to provide details on the changes in an entity’s cash and cash equivalents during a period. In accordance with this objective, cash receipts and payments are classified as operating activities, investing activities, or financing activities in the statement of cash flows and noncash investing and financing activities are separately disclosed.

ASC 230-10

10-1 The primary objective of a statement of cash flows is to provide relevant information about the cash receipts and cash payments of an entity during a period.

10-2 The information provided in a statement of cash flows, if used with related disclosures and information in the other financial statements, should help investors, creditors, and others (including donors) to do all of the following:

Assess the entity’s ability to generate positive future net cash flows
Assess the entity’s ability to meet its obligations, its ability to pay dividends, and its needs for external financing
Assess the reasons for differences between net income and associated cash receipts and payments
Assess the effects on an entity’s financial position of both its cash and noncash investing and financing transactions during the period.

ASC 230 provides general guidance on the classification of cash receipts and payments as operating, investing, or financing activities. Under ASC 230, cash receipts and payments that are not defined as financing or investing should be classified as operating activities. Although ASC 230 provides some guidance on identifying cash flows from operating activities, it points out that such cash flows are generally the cash effects of transactions or events that enter into the determination of net income. Because ASC 230 may not contain clearly defined principles for evaluating the classification of all cash payments and receipts in the statement of cash flows, some diversity in practice exists with respect to the classification of certain cash receipts and cash payments.