During its second quarter meetings, the Emerging Issues Task Force (EITF) released a proposed accounting standards update on the accounting for restricted cash in the cash flow statement, reached a consensus on changes to the statement of cash flows and added an issue on employee benefit plan master trust reporting to its agenda.

1. our roots rundeepTM
MAYER HOFFMAN MCCANN P.C. – AN INDEPENDENT CPA FIRM
A publication of the Professional Standards Group
MHMMessenger
© 2 0 1 6 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 • www.mhmcpa.com • All rights reserved.
TM
• Insurance claim settlements should be evaluated
for the nature of the loss, which would lead to
many lump sum payments being classified as cash
flows from investing activities. Corporate-owned
life insurance policies would also be considered
cash flows from investing activities, with entities
receiving an option about whether to classify
premium payments as operating, or investing
activities or a combination of both.
• Beneficial interest in securitization transactions
would be disclosed as a noncash activity and
cash receipts from payments of beneficial interest
considered cash inflows from investing activities.
• Additional clarification of how to apply the
predominance principle to guide entities on when
they should separate cash receipts and cash
payments into different sections of the cash flow
statement.
The EITF originally proposed that when settling zero
coupon bonds the portion related to the accreted
interest would be classified as an operating activity
while the portion attributable to the principal payment
would be classified as a financing activity. This
guidance was retained; however the scope was
clarified to exclude all other debt instruments except
for those with an insignificant coupon interest rate
relative to the effective interest rate on the debt, such
as commercial paper.
An accounting option was added to the proposal on
accounting for distributions from investees that qualify
for use of the equity method. As ratified an entity will
elect to either use a cumulative earnings or nature
During its second quarter meetings, the Emerging
Issues Task Force (EITF) released a proposed
accounting standards update on the accounting for
restricted cash in the cash flow statement, reached a
consensus on changes to the statement of cash flows
and added an issue on employee benefit plan master
trust reporting to its agenda.
Final Consensus on Accounting for Cash
Flows
The EITF recently affirmed, and the FASB ratified,
many of the provisions laid out in the EITFs proposed
accounting standards update to accounting for cash
flows. The original provisions included:
• Cash payments toward the prepayment of debt,
including third-party costs and other fees should be
classified as cash flows from financing activities.
• Contingent consideration payments made more
than three months after a combination that exceed
the acquisition date contingent liability would
be considered operating activities. However,
payments on contingent consideration made soon
after the acquisition would be classified as cash
outflows from investing activities.
July 2016
Second Quarter Developments from the Emerging Issues Task Force

2. © 2 0 1 6 M AY E R H O F F M A N M C C A N N P. C . 877-887-1090 • www.mhmcpa.com • All rights reserved.
MHMMessenger
2
The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
of distributions approach when classifying their
distributions, and whichever election they use would
have to apply to all distributions from investees who
qualify for the equity method. An entity would only be
permitted to use the nature of distributions approach
if they have the sufficient information.
Proposed Accounting Standard on Restricted
Cash
The exposure draft on accounting for restricted cash
would require entities to include restricted cash in the
beginning and ending statements in their statement of
cash flows. In addition the EITF proposed disclosure
of the location of restricted cash in the balance sheet
since for many entities it is not always apparent to
the end user where restricted cash falls presented.
The change will result in the beginning and ending
balances in the cash flow statement to be designate
the amount of “cash, cash equivalents and restricted
cash.” The EITF collected comment letters through
June 27, 2016 and will consider the feedback from the
exposure draft in future meetings.
New Agenda Item
The EITF also reached a consensus, which the FASB
ratified, for exposure on a new topic during the second
quarter 2016: presentation and disclosure guidance
for employee benefit plans that have investments in
master trusts. The AICPA’s Employee Benefit Plan
(EBP) Expert Panel raised the concern resulting in
the creation of this project.
Current guidance for disclosures of investments
held in master trust requires investments to be
measured using the fair value of the master trust and
segregated by general type (interest, dividends, etc.).
Entities report the total net change in the master trust
investments and the total investment income of the
master trust by type. They disclose a description of
how net assets were allocated, including the net gains
and losses to the plans and the employee benefit
plan’s percentage interest in the master trust.
Issues with investments in master trusts were raised
related to:
• The presentation of master trust balances and
activity;
• Disclosure of master trust financial statements;
• Master trust financial statement reporting;
• Disclosures for plans with a specific interest;
• Additional disclosures for investments held in
master trusts;
• Section 401(h) accounts investment disclosures;
and
• Consistency between topics.
For More Information
We will keep you up-to-date as changes occur. For
specific comments, questions or concerns, please
contact Mark Winiarski of MHM’s Professional
Standards Group. Mark can be reached at
816.945.5614 or mwiniarski@cbiz.com.