Joanne M. Flood - Wiley GAAP - Financial Statement Disclosure Manual

In February 20X3, the Company received $8.3 million from Blake MedTech, Inc. to satisfy the May 20X0 jury award of damages for infringement of the Company's heart monitor. For further information, see Note X.

On June 23, 20X1, an accidental gas explosion occurred at our manufacturing facility in Waco, Texas (“the Waco accident”). This facility was the primary production facility for the NutraBar brand. During fiscal 20X3, the Company settled its property and business interruption claims related to the Garner accident with our insurance providers. The total payments received from the insurers in fiscal 20X3 were $278.6 million and all previously deferred balances were immediately recognized upon settlement of the insurance claim in fiscal 20X3. The insurance recoveries recognized in fiscal 20X3, included in selling, general and administrative expenses totaled $132.6 million, representing $95 million in reimbursement for business interruption, a $32.4 million gain on involuntary conversion of property, plant and equipment and recovery of other expenses incurred of $5.2 million.

A severe rainy season affected many parts of Mississippi in December 20X0 and caused the company to case manufacturing at its facility in Mississippi dues to a breach of a levy and flooding at the industrial park where the facility is located. The Company established temporary offices and worked with customers to meet critical needs through other manufacturing facilities. The facility re‐established manufacturing operations on April 2, 20X1.

The Company maintains property and business interruption insurance policies. On February 4, 20X1, the Company filed a $5.0 million claim under one of its insurance policies to cover both the property damage and the business interruption. The policy had a $1.0 million deductible. In fiscal 20X1, the Company collected $4.0 million as settlement of the claim under the policy.

The Company included in Operating income (loss) for fiscal year 20X1 the $4.0 million of insurance proceeds related to recovery of certain losses recognized for property damage and business interruption experienced by the Company. Of the $4.0 million recorded for fiscal 20X1, $3.0 million were recorded in cost of goods sold and $1.0 million were recorded in Selling, general, and administrative expenses in order to offset the recognized losses.

1 1Application of Regulations S-X (17 CFR PART 210) can be found on the ecfr.govwebsite.

2 2This bulleted item is effective upon implementation of ASU 2017‐12.

3 3Upon implementation of ASU 2016‐13, this reference will change to ASC 326‐30‐35‐2.

4 4Upon implementation of ASU 2016‐13, this bullet point is superseded.

5 5Ibid.

6 6This bulleted item is effective upon implementation of ASU 2018‐02, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long‐Duration Contracts.

7 7Ibid.

8 8Life insurers should exclude from amounts reclassified out of accumulated other comprehensive income changes in unrealized gains and losses on available‐for‐sale debt securities associated with direct adjustments made to policy liabilities necessary to reflect these balances as if such unrealized gains and losses were realized. (ASC 220‐10‐55‐15C)

9 9Ibid.

10 10Ibid.

1 Authoritative Literature Subtopic Scope and Scope Exceptions

2 Practice Alert Information People Timing

3 Presentation and Disclosure RequirementsObjective Cash and Cash Equivalents Restrictions on Cash and Cash Equivalents Gross versus Net Basis Classification of Cash Receipts and Disbursements Operating Activities—Cash Inflows Operating Activities—Cash Outflows Investing Activities—Cash Inflows Investing Activities—Cash Outflows Financing Activities—Cash Inflows Financing Activities—Cash Outflows Other Issues Related to Classification of Cash Flows Acquisition and Sales of Trading Debt Securities Insurance Proceeds and Payments Distributions Received from Equity Method Investees More Than One Class of Cash Flows Discontinued Operations Noncash Investing and Financing Activities Reporting Hedging Transactions Other Topics with Cash Flow Subtopics Format of the Statement of Cash Flows The Direct Method The Indirect Method Reconciliation of Net Income and Net Cash Flow from Operating Activities

4 Presentation and Disclosure ExamplesExample 6.1: Statement of Cash Flows (without Details of Operating Activities) Operating Activities Presentation Example 6.2: Operating Activities: Formats for Direct and Indirect Methods Example 6.3: Statement of Cash Consolidated Entities Example 6.4: Cash and Cash Equivalents—Accounting Policy Example 6.5: Accounting Policy for Cash and Cash Equivalents, Including Details Example 6.6: Amount of Interest and Income Taxes Paid and Noncash Investing and Financing Activities Example 6.7: Amount of Interest and Income Taxes Paid and Noncash Investing and Financing Activities Example 6.8: Nature of Restrictions on Cash and Cash Equivalents Restricted Cash Example 6.9: Nature of Restrictions on Cash and Cash Equivalents with Internal Reference Restricted Cash Example 6.10: Disclosure in Tabular Format—Restricted Cash Presented in More Than One Line Item on the Balance Sheet

Unlike other statements, the statement of cash flows is based on the cash basis of accounting rather than on the accrual basis. Therefore, all bank account debits and credits that are unrestricted demand deposits should be reported in the statement as inflows and outflows of cash. Reporting cash flows involves no estimated allocations and few judgments except regarding classification in the statement.

Cash flows are recognized in the statement of cash flows in the period they occur. However, entities must disclose in the statement noncash investing and financing activities. (FASB Concepts Statement [CON] No. 5)

ASC 230, Statement of Cash Flows , contains one Subtopic:

ASC 230‐10, Overall

A statement of cash flows is a required part of a complete set of financial statements for business enterprises and not‐for‐profit organizations. The following are not required to present a statement of cash flows:

Defined pension plans that present financial information under Topic 960.

Other employee plans that present information similar to ASC 960. (ASC 962‐205‐45‐9)

A common trust fund, variable annuity account, or similar fund maintained by a bank, insurance entity, or other entity in its capacity as a trustee, administrator, or guardian for the collective investment and reinvestment of moneys.

Investment companies within the scope of ASC 946 if the following conditions are met:Substantially all of the entity's investments are highly liquid,The entity's investments are carried at fair value and classified in accordance with ASC 820 as Level 1 or Level 2 or were measured using the practical expedient to determine fair value and are redeemable in the near term,The entity has little or no debt, based on average debt outstanding during the period, in relation to average total assets, andThe entity provides a statement of changes in net assets.(ASC 230‐10‐15‐4)

The SEC offers suggestions for avoiding errors when preparing the statement of cash flow. While these suggestions apply to the statement of cash flows, they are equally valid when preparing other financial statement statements.