Running head: ACCOUNTING STANDARD UPDATE (2016-15)
1
Accounting Standard Update (2016-15) for Statement of Cash Flows
Student’s Name
Student’s Affiliation
Date
, ACCOUNTING STANDARD UPDATE (2016-15)
2
The Financial Accounting Standards Board (FASB) generates mandatory generally
accepted accounting principal (GAAP) to be used by parastatal entities (FASB, 2016). An
accounting standard update (ASU) is not mandatory, rather it is a document which communicates
on the amendment of the accounting standards codification, and provides additional information
to the advantage of the one using the GAAP by helping them understand why and how the
GAAP is being changed and the time it will be implemented. Although the ASU is not
mandatory, it is produced by the FASB (FASB, 2016). After the stakeholders in the FASB
noticed great diversity in the grouping and portraying of cash payments and receipts in stating
cash flows (Topic 230), they came up with the ASU (2016-15) which focuses on eight distinct
cash flow criteria with a view of breaching the diversification.
The recommendations made in the entire standard update will be used for all relevant
entities including business entities and nonprofit organizations which need to give a clear cash
flow statement as per tittle 230 (FASB, 2016). The changes in the rationalization give the
following directions to the 8 distinct issues on cash flows (Rashty, 2018). First and foremost, on
the issue of payment of contingent consideration after a combination of business (FASB, 2016):
under this, there are three stipulated directions: Cash payments not met within the time from the
takeover period of a business firm merge by the new owner in order to satisfy a certain liability
have to be excluded and identified as outflows of cash for operating and financing activities,
payments in cash meeting a specific consideration of a recognized amount on the takeover date
(including the adjustments made on the measurement periods) should be taken as financial
activities, and the surplus taken as operating activities, and monetary payments are done
1
Accounting Standard Update (2016-15) for Statement of Cash Flows
Student’s Name
Student’s Affiliation
Date
, ACCOUNTING STANDARD UPDATE (2016-15)
2
The Financial Accounting Standards Board (FASB) generates mandatory generally
accepted accounting principal (GAAP) to be used by parastatal entities (FASB, 2016). An
accounting standard update (ASU) is not mandatory, rather it is a document which communicates
on the amendment of the accounting standards codification, and provides additional information
to the advantage of the one using the GAAP by helping them understand why and how the
GAAP is being changed and the time it will be implemented. Although the ASU is not
mandatory, it is produced by the FASB (FASB, 2016). After the stakeholders in the FASB
noticed great diversity in the grouping and portraying of cash payments and receipts in stating
cash flows (Topic 230), they came up with the ASU (2016-15) which focuses on eight distinct
cash flow criteria with a view of breaching the diversification.
The recommendations made in the entire standard update will be used for all relevant
entities including business entities and nonprofit organizations which need to give a clear cash
flow statement as per tittle 230 (FASB, 2016). The changes in the rationalization give the
following directions to the 8 distinct issues on cash flows (Rashty, 2018). First and foremost, on
the issue of payment of contingent consideration after a combination of business (FASB, 2016):
under this, there are three stipulated directions: Cash payments not met within the time from the
takeover period of a business firm merge by the new owner in order to satisfy a certain liability
have to be excluded and identified as outflows of cash for operating and financing activities,
payments in cash meeting a specific consideration of a recognized amount on the takeover date
(including the adjustments made on the measurement periods) should be taken as financial
activities, and the surplus taken as operating activities, and monetary payments are done
