The Financial Accounting Standards Board is proposing one more change to rules around cash flow classification, this time to steer all preparers to the same method for presenting and classifying changes in restricted cash.

FASB says companies follow different methods of classifying and presenting changes in restricted cash. Some reflect cash receipts and cash payments in bank accounts that hold restricted cash as cash inflows and outflows. Others describe those transactions as non-cash investing or financing activities.

In February, FASB issued a proposed update to cash flow classification to address a variety of areas where it found differences in how companies follow the standards. FASB’s Emerging Issues Task Force studied the issues and recommended the changes to accounting rules to streamline cash flow classifications. The issue around restricted cash, however, was deferred. Now FASB’s latest proposal seeks to address that concern as well.

FASB says current GAAP doesn’t provide specific guidance on classification of restricted cash other than some limited guidance geared toward not-for-profit entities. A new rule would reduce diversity in practice, FASB says, which promotes greater comparability among entities.

Under the newest proposal, FASB would revise accounting rules to say that a statement of cash flows should explain the change during the period for total cash, cash equivalents, and anything described as restricted cash or restricted cash equivalents. “Amounts generally described as restricted cash and restricted cash equivalents would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows,” the proposal says.

FASB asks a number of questions for stakeholders to consider that will help the board determine any changes it should make to the proposal. Is the rule an appropriate solution? Should it include any additional disclosure requirements? Does the transition method make sense? How long would it take to adopt the rule?

The board is accepting comments on the proposal through June 27. The board accepted comments on the earlier proposal providing eight other classification provisions, and it remains under deliberation.

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