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P3: the cash flow statement by ASC 230 (defect 1, D-35, D-42)
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Direct method with the operating reconciliation and noncash schedules; it
foots by construction (Lean and Kani). Every non-cash account belongs to
one section; reversals net; a member or lender paying for the company is
cash borrowed and spent (D-42, constructive receipt and disbursement);
property a member contributes stays noncash. The bookspec seed: one loader
checks every example.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
Claude-Session: https://claude.ai/code/session_01T3gXMVt7XJPi6ens1or9Dj
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docs/spec/README.md
+10 -1
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@@ -63,4 +63,13 @@ Read on 2026-10-13 through Deloitte's free DART roadmaps, which reproduce
ASC text: ASC 230-10-45-16 and -28, 326-20-55-37/38, 606-10-25-23, 45-2,
55-37/38, 830-20-30-1. Read directly in the ASC basic view on 2026-10-14
(`sources/fasb-asc.md`): 360-10-35-4, 340-10-05-2/4/5, 210-10-45-1/2/5,
230-10-45-7/10/12/13/14/15, 606-10-55-36 through 55-38. None left open.
230-10-45-7/10/12/13/14/15, 606-10-55-36 through 55-38. Read on
2026-10-20 where public sources reproduce the Codification (EY's FRD on
the statement of cash flows, July 2026; FASB ASUs 2016-15 and 2016-18;
Deloitte's public DART Roadmap): ASC 230-10-10-1, 45-1, 45-4, 45-5,
45-8, 45-9, 45-12(c), 45-13(c), 45-14(a), 45-15(a)/(c), 45-16(a)/(b),
45-17, 45-24 to 45-26, 45-28 to 45-31, 50-3 to 50-8, and 830-230-45-1;
each checked again against the same sources in the P3 review (numbers,
pages and wording hold). Open: 105-10-05-1 to 05-3, read only in their
2009 text (ASU 2009-01, and as Wiley GAAP 2020 quotes them); their
current wording is unconfirmed.
docs/spec/rules.md
+305 -45
View File
@@ -356,51 +356,309 @@ earnings the same running way, D-38, 2026-10-20)
`a_yen_members_page_splits_in_whole_yen`; the bookspec examples
`members-close.*`.
## B-14 Statements: P&L for a period; cash flow by the indirect method
## B-14 Statements: P&L for a period; cash flows by the direct method
**Status:** AUTHORITY
**Status:** AUTHORITY, except where marked CONVENTION or DECISION
ASC 230-10-45-28 (cited): an entity not using the direct method "shall
determine and report the same amount for net cash flow from operating
activities indirectly by adjusting net income … (the indirect or
reconciliation method)." ASC 230-10-45-16: "All of the following are cash
inflows from operating activities: Cash receipts from sales of goods or
services…". A closing entry is not income or spending (B-11), so period
statements exclude it.
The P&L covers a period; a closing entry is not income or spending
(B-11), so period statements exclude it.
Investing and financing are gross (ASC 230-10-45-7, read directly
2026-10-14, `sources/fasb-asc.md`:
"information about the gross amounts of cash receipts and cash payments
during a period is more relevant than information about the net
amounts"; 45-8 allows netting only where "the turnover is quick, the
amounts are large, and the maturities are short"). Financing inflows
include "Proceeds from issuing equity instruments" and "other short- or
long-term borrowing" (45-14(a), (b)); outflows include "distributions to
owners" and "Repayments of amounts borrowed" (45-15(a), (b)). Every cash
flow is investing, financing, or operating (45-10). Investing
"include[s] making and collecting loans and acquiring and disposing of
debt or equity instruments and property, plant, and equipment" (ASC
230-10-20). Which accounts hold loans made, investments, and debt is a
fact of each company's chart, so it is a setting: `[books]
financing_accounts` and `investing_accounts` in wanderbooks.toml (with
`cash_accounts`), read by the MCP tools and the viewer alike.
The statement of cash flows (P3 defect 1, D-35, D-42; the paragraphs were read
in public sources that reproduce the Codification, `sources/fasb-asc.md`):
Money an owner advances, by paying a company expense personally (a
"Due to owners" liability), is borrowing: PwC Viewpoint, Financial
statement presentation 6.9.3.1 (constructive receipts and
disbursements) presents cash a third party pays on the entity's behalf
"as though the transaction took place through the bank accounts of the
reporting entity": a financing inflow and an operating outflow. Listing
that liability in `financing_accounts` gives exactly that; repaying the
owner is then a repayment of amounts borrowed. "Judgment is required"
(PwC), so it is the company's setting, not a fixed rule.
1. **Cash receipts and payments.** The statement reports "the cash
effects" of operations, investing and financing (ASC 230-10-45-1; its
objective, 10-1: "cash receipts and cash payments"). An entry
contributes to the body only its net movement of the cash accounts,
and what a member or a lender paid or received for it (rule 11, which
nets to zero within the entry); an entry that moves neither
contributes nothing; a transfer between two cash accounts is no flow. The period is [start, end], inclusive. The
cash accounts are every account holding cash, cash equivalents or
restricted cash: the statement explains the change in their total
(45-4, as ASU 2016-18 amended it), and transfers among them "are not
reported as cash flow activities" (45-5). Which accounts those are is
the books' `books.cash_accounts`.
2. **Partition.** Every receipt and payment is investing, financing or
operating (45-10), so every non-cash account is in exactly one section:
investing (the cost and accumulated-depreciation accounts of every
registered fixed asset, and `books.investing_accounts`); financing
(equity, and `books.financing_accounts`); operating (every other
balance-sheet account, and revenue and expense, but see rule 4). The
roles must agree with the chart and each other, or the statement is
refused with the setting to change: cash and investing accounts are
assets; financing accounts are liabilities (equity listed is accepted:
it is financing anyway); no code twice in a list or in two lists; no
registered asset's account as cash; at least one cash account. One
check (`cashflow::role_problems`) is behind both the refusal and
`books.settings`' problems.
3. **Only the cash portion** of a part-cash transaction is reported
(50-5). An entry's cash `c` is applied to the sections moving against
it, in the order operating, investing, financing, each up to its own
movement; what is left of a section's movement is the entry's noncash
part, disclosed (rule 7). CONVENTION: the order (the ASC is silent on
allocating within one entry); it matters only for an entry with a
noncash source and two or more sections paid by cash, and is disclosed.
Within a section the same order splits the cash among its kinds (rule
5).
4. **Gains and losses on investing assets are investing**: receipts from
sales of PP&E are investing (45-12(c)), so the whole proceeds are, and
the gain or loss is taken out of net income (45-28(b)). In an entry that
credits a registered cost account or an investing account, the revenue
and expense lines are investing, except interest, received or paid (tax
categories `interest_income` and `interest_expense`): interest is
operating in any entry (45-16(b), 45-17(d)). The trigger is broad (a
return, a reclass or an impairment credits the cost account too), so the
reconciling line reads "(Gain) loss and other noncash changes in
investing assets".
5. **Gross lines by kind** (45-7; investing and financing inflows and
outflows "reported separately", 45-26). One line per entry, section and
kind, with the entry, date, label and the kind's accounts. Operating
lines carry the class 45-25 requires "at a minimum" (a)-(g), kind by
kind within the entry, by the direction of the cash: the cash an
entry's `interest_income` lines take is (b) interest received, and its
`interest_expense` lines' (e) interest paid, whatever else the entry
settles (a loan payment on an operating payable is (d) for the
principal and (e) for the interest, never all (e)); the rest of its
operating cash, by its other operating lines: a receipt is (a) if a
line is revenue or the receivables control, or the entry's party is a
customer, else (c); a payment is (g) if every such line is on an
account whose tax category is `taxes_licenses` (payments to
governments for taxes and fees are 45-17(c), apart from suppliers'
45-17(b); 45-25 names only income taxes, (f)), else (d) if a line is
an expense, a liability or a non-receivables asset, else (g). (Interest paid back out
is (g); interest refunded to the company, (c).) The operating cash is
split among these kinds as a section's among its kinds (rule 3), in
the order: the rest, interest received, interest paid (CONVENTION).
Class (f) stays empty until a tax category marks an entity-level income
tax (a
partnership pays none "as such", IRC §701, but can under §6225 or a
state pass-through election). Investing and financing kinds (D-35):
purchases and sales of property and equipment, payments for and
collections on each investing account, contributions from and
distributions to each member (by name; equity not a member's by
account), proceeds of and repayments of each financing liability. An
original's direction is its nature (45-15(a): cash out of equity is a
distribution). The printed statement and the viewer show operating one
row per class, and investing and financing one row per kind with its
total, each transaction listed under it (D-35); `books.cash_flow` and
the exports carry every line. Known limits: an entry's other operating
lines take one class, so its mixed receipts and payments other than
interest net within it; class (b) relies on portfolio interest being
categorized `interest_income` (interest receivable collected is (c)).
6. **Reversals.** A reversal takes its chain root's sections, class and
kind, with its own sign (`Ledger::reversal_chain`). Pairing walks each
chain from its root: an entry and its reversal both in the period drop
out of every line and disclosure, when their flows are exact negatives
(proved, and checked at runtime), so a reversal of a reversal whose
partner is paired is shown. A reversal shown alone is labelled
"Reversal of #N — <N's description>", a reinstatement "Reinstatement
of #A (reverses #B)", listed under the original's kind: never a label
from a reversal's sign (D1-c).
7. **Noncash investing and financing activities are disclosed** (50-3,
50-4; placement, 50-6). Disclosed: every entry not netted whose noncash
part moves financing, or moves investing through an account that is
neither accumulated depreciation nor a rule-4 P&L line, or that
exchanges inside investing and financing without cash (50-4's
"converting debt to equity", a note for equipment, a trade-in): `x =
max(0, min(D - out, C - in))` over the net debits `D` and credits `C`
of its investing and financing balance-sheet accounts, `in` and `out`
the cash those two sections took in and paid out, what a member or
lender handled for the entry included (rule 11: equipment a bank paid
for is 1,000 in and 1,000 out, nothing exchanged). Amount: `max(Σ
max(r_k, 0), x)`. Depreciation is a
reconciling item, not an activity. Limit: a trade-in within one cost
account nets away.
8. **Net income reconciled to operating cash**, a separate schedule with
the direct method (45-30; major classes of reconciling items, 45-29;
what is removed, 45-28): operating = NI + G + X + W, over the period's
non-closing entries. NI, net income; G, the rule-4 P&L lines; X, each
entry's operating noncash part, as "Depreciation" (its investing and
financing balance-sheet lines all accumulated depreciation), "Noncash:
through <A>" (those lines, accumulated depreciation aside, all on A),
or "Other noncash items"; W, minus each
operating balance-sheet account's movement ("Increase in" / "Decrease
in"). An identity over balanced entries (Lean
`operating_reconciliation_ties`), checked at runtime.
9. **The sections foot** (45-24: the statement reconciles beginning and
ending cash). `reconciles {sections_sum, net_change, difference}`; any
difference, a section unequal to its lines, or a reconciliation unequal
to operating is `CashFlowDoesNotFoot`, an engine error: nothing is
produced. It can't happen on posted entries (Lean
`cashflow_sections_sum_to_cash_change`, `Reachable.cashflow_foots`).
10. **Closing entries are never in the statement** (B-11). A close moves
only revenue, expense and equity, and cash accounts are assets, so a
close has no cash line.
11. **What a member or a lender pays, or receives, for the company is
cash the company borrowed (or a member contributed) and spent**
(DECISION, D-42, the owner, 2026-10-20, revising D-35's first point;
bookspec's CHOICE: the standard leaves it open).
*Source.* The Codification does not address a payment a third party
makes on the entity's behalf (PwC Viewpoint FSP 6.9.3: "ASC 230 does
not address these situations"; BDO Blueprint 3.4: "While ASC 230 is
silent"; EY FRD 4.6.2: "judgment will be needed"; KPMG Handbook
Q8.3.10), so 105-10-05-2 sends the question to nonauthoritative
guidance. There the firms present it by substance, as constructive
receipt and disbursement: PwC 6.9.3.1, "a reporting entity should
include cash flows received or paid by a third party on behalf of the
reporting entity" (a bank paying a vendor: "a financing inflow ... and
an operating outflow"); DART Roadmap 7.2 (third-party financing,
Example 7-2: a lender paying an insurance premium, an operating outflow
and a financing inflow; the contrast, a supplier's own finance arm, is
AICPA TQA 1300.16 and the SEC staff's 2005 view: noncash); BDO 3.4
(Example 3-5: a bank paying for equipment, an investing outflow and a
financing inflow; it names "a parent might pay on behalf of a
subsidiary expenses"); EY 5.2.4 and 5.3.1 (third-party financing,
unlike the seller's, is a financing inflow and an operating or
investing outflow). KPMG Q8.3.10 also accepts a noncash presentation
for equipment a lender pays for. A CPA would present it as the firms
do; the change in cash is the same either way. The rule, entry by
entry, after its own cash (rule 3; `kernel::constructive`):
- **Paid for the company.** A financing liability
(`books.financing_accounts`: the members' financing account such as
Due to Members, a loan, a card listed as financing) credited against
operating or investing lines debited paid for them: a financing
inflow under the liability's kind ("Proceeds from borrowing — 2100
Due to Members", 45-14(b)) and the operating outflow (its class by
rule 5) or the investing outflow (45-13(c)), both on the entry's
date. A member's capital credited against revenue or expense debited
paid for them likewise, a contribution ("Contributions from members
— <member>", 45-14(a)): the expense-to-capital case below.
- **Received for the company.** A financing liability or a member's
capital debited against revenue, expense or the receivables control
credited (a customer paying a member, a vendor refunding to a
member's card): an operating inflow, and a repayment or a
distribution (PwC 6.9.3.1: cash "received or paid").
- Each line's `on_behalf` is the part of its cash so handled. The parts
net to zero within the entry, so the sections still sum to the
change in cash (rule 9; Kani `constructive_nets_to_zero`). Kinds take
it in order, operating before investing and, within operating,
balance-sheet lines before revenue and expense (CONVENTION, as rule
3's: it matters only for an entry whose sources cover part of its
uses, and then leaves capital the revenue and expense it can pay
for). A reversal mirrors its root (rule 6; Kani
`constructive_mirrors`), so a payment and its reversal net out, and
a reimbursement is the repayment it is (45-15(b)).
- **Stays noncash**, disclosed (rule 7): property a member contributes
that it already owned (capital credited against an asset, a prepaid
included: no cash moved, to anyone, 50-4); property handed over in
kind (an asset credited against a financing liability or capital
debited); a debt exchanged for another or for equity (50-4's
"converting debt to equity"); interest and guaranteed payments
charged into what the company owes the lender or member (tax
categories `interest_expense`, `interest_income`,
`guaranteed_payments`: their own charges, accrued, paid to no one;
"interest paid", 45-25(e), is cash paid); and a purchase on the
seller's own credit, an operating payable (50-4, "acquiring assets by
assuming directly related liabilities"; EY 5.3.1), flagged
`asset_on_operating_payable` (rule 12).
- **An expense a member pays into capital** (Dr expense / Cr the
member's capital, no cash) is a constructive contribution and an
operating outflow. The member paid cash to a vendor for the company;
whether the company owes it back (Due to Members) or not (capital)
is only the form of the financing, not the substance of the payment,
which the guides follow ("the same economic result", DART 7.2). BDO
3.4 lists a parent paying a subsidiary's expenses among the cases
for constructive cash flows without asking how the subsidiary
records what it owes back (a parent's payment is often booked as a
contribution), and none of the guides read presents an expense
someone paid on the entity's behalf as noncash. The books' own K-1
worksheet already counts it as a cash contribution (`k1.rs`
INVARIANT 3, DECISION 2026-10-15), so the two agree.
- **Card purchases** follow the card's classification (D-35,
unchanged): on a card listed as financing, the issuer is a lender
that paid the merchant, so the purchase is borrowed and spent and the
card payment a repayment; on a card that is an operating payable, the
purchase is an accrual and its payment operating (d).
- *Limits* (the books can't tell who was paid). A lender's or member's
own charge credited to what the company owes them, other than
interest and guaranteed payments (a card's annual fee, rent a member
charges), reads as paid for the company: its operating outflow shows
when charged, its repayment as financing (each section's total over
the charge and its payment is right; the timing is the charge's).
Post what the company owes a member for their own goods or services
to a payable, not to the members' financing account. A note to the
seller listed in `books.financing_accounts` reads as a lender's loan
(borrowed and invested, where 50-4 makes it noncash): keep a seller's
note out of it (its principal payments then show as operating, where
45-13(c) makes them financing; flagged). An expense a member
contributes in kind (an item already owned, expensed at once) reads
as paid: post it to an asset first. A debt a member or a new lender
pays off directly is a noncash exchange (disclosed), where PwC
6.9.3.1 and BDO Example 3-6 would gross it up. Debt issue costs, a
financing outflow (45-15(f)), posted to an expense account read as
operating: post them to a contra-liability listed as financing, so a
fee the lender withholds is a noncash exchange inside financing and
the loan reads as its net proceeds. An entry that moves revenue or
expense straight to capital by hand, as a close does, reads as paid
or received for the company: close periods with `books.close_period`,
whose entries are never in the statement (rule 10).
12. **Equipment paid for, or sold, later** (D-35; 45-12(c), 45-13(c)). A
bill payment carries its bill's split, equipment part first: the
payables line's equipment part is investing, so its payment is an
investing outflow, the reconciliation's payables change leaves it out,
and the purchase is disclosed only for what is unpaid at the period's
end (a payment reversed by then is unpaid again; EY FRD 5.3.3; DART
6.1.3; bills post to the general-expenses
control today, so this waits for bills with account lines). A card
purchase follows the card's classification: on an operating payable it
is disclosed and flagged (`asset_on_operating_payable`), on a financing
one it is borrowed and invested (rule 11) and its payment a repayment. A sale for an amount owed on an
operating receivable is disclosed and flagged with the fix
(`asset_sold_on_operating_receivable`: post it to an investing
account). The flags are the statement's `warnings`, and items in the
viewer's Needs attention. Limits: payments more than "soon after" purchase are
financing by 45-13(c) when the seller financed it, which the books
can't tell from a bill; unregistered equipment is operating (the asset
register's `unregistered_cost` flags it).
**Enforced:** `profit_and_loss_for_period`, `cash_flow`. **Checked:** Lean
`statements_add_up`; `prop_period_pnl_partitions`;
`cash_flow_reconciles_to_change_in_cash`;
`financing_is_gross_borrowing_apart_from_repayment`,
`a_loan_the_entity_makes_is_investing_gross`,
`an_expense_the_owner_paid_is_borrowing_then_operating`.
Scope: single-currency books (R-5). A foreign-currency cash account's
exchange effect would be a separate reconciling line (830-230-45-1); a
hand-posted revaluation of a cash account shows as an operating receipt.
**Enforced:** `profit_and_loss_for_period`; `cashflow::cash_flow` (with
`kernel::entry_flows`, `apply_cash`, `constructive`, `exchanged`),
`role_problems`, `foot`; `ledger_package::cash_flow_for` (the server, the
package and the viewer). **Checked:** Lean `statements_add_up`,
`cashflow_sections_sum_to_cash_change`, `entry_flows_sum`,
`flows_reversal`, `constructive_nets`, `constructive_neg`,
`constructive_sections_net`, `stmt_flows_sum`, `stmt_flows_reversal`,
`operating_reconciliation_ties`, `cashflow_reversal_nets`,
`Reachable.cashflow_foots`, `Reachable.cashflow_is_change_in_cash`; Kani
`entry_flows_*`, `no_cash_no_flow`, `take_is_odd_and_bounded`,
`apply_cash_mirrors`, `apply_cash_spends_exactly`,
`exchanged_is_bounded`, `constructive_nets_to_zero`,
`constructive_mirrors`; `prop_period_pnl_partitions`,
`prop_cash_flow_laws` (5,000 cases, reversals of reversals, rule 11's
shapes), `prop_pure_entries_sections_are_movements`; regressions
`defect1_reversed_contributions_foot_regression`,
`defect1_two_member_llc_first_year_regression`,
`defect1_two_member_llc_as_of_march_18_regression` (and bookspec
`cash-flow.*`, `cash-flow.paid-on-the-companys-behalf` for rule 11);
`disposal_proceeds_all_investing`,
`an_expense_a_member_paid_is_borrowed_and_spent`,
`reimbursing_a_member_is_a_repayment_of_borrowing`,
`equipment_a_lender_paid_for_is_borrowed_and_invested`,
`an_expense_a_member_paid_into_capital_is_contributed_and_spent`,
`property_a_member_contributes_stays_noncash`,
`equipment_on_the_sellers_credit_stays_noncash_and_flagged`,
`a_payment_made_for_the_company_and_its_reversal_net`,
`part_paid_by_a_member_and_a_refund_a_member_received`,
`a_lender_pays_balance_sheet_lines_first_and_a_customer_pays_a_member`,
`interest_and_guaranteed_payments_charged_to_a_creditor_stay_noncash`,
`a_fee_withheld_from_a_loan_follows_its_account`,
`odd_shapes_foot_and_net`, `operating_classes_follow_asc_230_10_45_25`,
`a_reversal_of_a_reversal_is_shown_and_foots`,
`a_reversal_three_levels_down_is_labelled_a_reversal`,
`operating_cash_is_classed_kind_by_kind`,
`two_kinds_of_one_class_are_one_line`,
`interest_paid_in_a_disposal_stays_operating`,
`a_loss_on_disposal_on_a_revenue_or_expense_account_is_investing`,
`an_investments_gain_is_investing`, `cash_goes_to_the_sections_in_order`,
`cash_goes_to_a_sections_kinds_in_order`,
`converting_member_debt_to_capital_is_disclosed`,
`a_bill_payment_carries_its_bills_split`,
`a_reversed_bill_payment_leaves_the_purchase_unpaid`, the role refusals,
`foot_refuses_any_difference` (`crates/ledger-core/tests/spec_cash_flow.rs`).
## B-15 Depreciation: straight line, salvage never depreciated, partial months by days
@@ -491,10 +749,11 @@ Attorneys' gross proceeds stay at $600 (not modeled).
What counts as paid: payments made in the calendar year (§6041(a)), so a
prepayment counts when made. A worksheet as of a day (the CPA package's,
B-33) counts the year's payments from January 1 through that day. The engine counts credits minus debits to the
payment sources on a vendor's tagged entries: `[books] cash_accounts` and
`financing_accounts` (a member or lender paying on the company's behalf;
the company is still the payer). A card charge leaves neither (1099-K); a
B-33) counts the year's payments from January 1 through that day. The
engine counts credits minus debits to the payment sources on a vendor's
tagged entries: `[books] cash_accounts` and `financing_accounts` (a
member or lender paying on the company's behalf; the company is still the
payer). A card charge leaves neither (1099-K); a
bill is not paid until it is (`form1099::vendor_1099_report_with`,
checked by `payments_come_from_cash_and_financing_only`). A W-9 is on
file by the vendor's flag or its party's W-9 facts.
@@ -1067,7 +1326,8 @@ fixed asset register, mid-year and at year end; `as_of_package_iif_stops_at_as_o
`iif_ties_to_the_trial_balance_as_of`, 2,000 cases); `ledger-mcp`
`oracle_mcp.rs` (`cpa_package_holds_the_year_and_its_evidence`); the
bookspec examples `bookspec/examples/as-of-package-stops-at-as-of.toml`
and `bookspec/examples/1099-worksheet-through-as-of.toml`.
and `bookspec/examples/1099-worksheet-through-as-of.toml` (`ledger-core`
`tests/bookspec.rs`).
## B-34 The QuickBooks Desktop file (IIF): plain ASCII, every entry through as_of, closes left out
docs/spec/sources/fasb-asc.md
+193 -1
View File
@@ -1,6 +1,7 @@
# FASB Accounting Standards Codification: paragraphs read directly
Read 2026-10-14 in the ASC's basic view (asc.fasb.org, the owner's login).
Read 2026-10-14 in the ASC's basic view (asc.fasb.org, the owner's login),
except the ASC 230 section added 2026-10-20, which says where it was read.
The Codification is copyrighted by the Financial Accounting Foundation,
so this file keeps only short quotes and paraphrase, with the paragraph
numbers to look up. Earlier ASC paragraphs were read through Deloitte's
@@ -49,6 +50,197 @@ loans the entity makes are investing (45-12(a), 45-13(a)). Proceeds of
→ B-14: money owners advance (Due to Shareholders) is borrowing, so
financing, gross; a loan the company makes is investing, gross.
## ASC 230 for the direct method (rules.md B-14, P3 defect 1)
Read 2026-10-20, not in the ASC basic view: DART's Codification pages
need a login, and its public Roadmap on the statement of cash flows
quotes only some of these paragraphs. So they were read where public
sources reproduce the Codification's text: EY's Financial reporting
developments guide "Statement of cash flows" (July 2026,
https://www.ey.com/content/dam/ey-unified-site/ey-com/en-us/technical/accountinglink/documents/ey-frd42856-07-29-2026.pdf,
which quotes ASC 230 and 830-230 in full; page numbers its own), the
FASB's ASUs that last amended them (ASU 2016-15,
https://storage.fasb.org/ASU%202016-15.pdf; ASU 2016-18,
https://storage.fasb.org/ASU%202016-18.pdf), and Deloitte's public DART
Roadmap where it quotes them
(https://dart.deloitte.com/USDART/home/codification/presentation/asc230-10/roadmap-statement-cash-flow,
no trailing slash: with one the page is "Tree node not found").
Quotes are short; the rest is paraphrase.
- **230-10-10-1** (EY p. 1): the statement's primary objective is "to
provide relevant information about the cash receipts and cash payments
of an entity during a period." → B-14 rule 1.
- **230-10-45-1** (EY p. 1): the statement "shall report the cash effects
during a period of an entity's operations, its investing transactions,
and its financing transactions." (It says nothing of reconciling
beginning and ending cash: that is 45-24.)
- **230-10-45-4** (EY p. 5): the statement explains the change in the
total of cash, cash equivalents and restricted cash. ASU 2016-18 struck
its old sentence on the totals at the beginning and end of the period
(gone from the current text). → rule 1: the cash accounts are all of
them. (50-7 and 50-8, EY pp. 5-6, 30: the nature of restrictions, and
the balance-sheet lines that hold the total when there are several.)
- **230-10-45-5** (EY p. 5): purchases and sales of cash equivalents are
cash management, and transfers among cash, cash equivalents and
restricted cash "are not reported as cash flow activities". → rule 1: a
transfer between two cash accounts is no flow.
- **230-10-45-12(c)** (EY p. 41; ASU 2016-15 p. 25): investing inflows
include "Receipts from sales of property, plant, and equipment and other
productive assets". → rule 4.
- **230-10-45-13(c)** (EY p. 41; ASU 2016-15 p. 12): investing outflows
include payments "at the time of purchase or soon before or after
purchase" for PP&E; generally only those are investing, and incurring
debt directly to the seller is a financing transaction whose later
principal payments are financing. → rule 12 (the bill split), and the
limit B-14 records.
- **230-10-45-14(a)** (EY p. 42): financing inflows include "Proceeds from
issuing equity instruments". **45-15(a)**: financing outflows include
"Payments of dividends or other distributions to owners"; **45-15(c)**:
most principal payments on seller-financed debt for PP&E are financing.
(45-14(b) and 45-15(b): above, read directly.)
- **230-10-45-16(a), (b)** (EY p. 43): operating inflows include "Cash
receipts from sales of goods or services", including collections of
receivables from customers arising from those sales; and interest and
dividends received. 45-16(c): all other operating receipts. → rule 5,
rule 4's exception.
- **230-10-45-17** (EY pp. 43-44): operating outflows: payments for goods
for resale (a), to "other suppliers and employees" (b), to governments
for taxes, duties, fines and other fees (c), interest to lenders and
other creditors (d), and others ((e), (ee), (f)). (Income taxes fall
under (c); 45-25 names them a class.)
- **230-10-45-8, 45-9** (EY p. 12): only items whose "turnover is quick,
the amounts are large, and the maturities are short" (original maturity
"three months or less"; amounts due on demand count) may be reported
net, and even then need not be. **230-10-45-26** (EY p. 13): otherwise
investing and financing inflows and outflows are reported separately,
"proceeds of borrowings ... separately from repayments of debt". → rule
5: gross lines, members' advances and their repayments apart.
- **230-10-45-24** (EY p. 15; ASU 2016-18 pp. 4-5): the statement reports
net cash from operating, investing and financing activities and "the
net effect of those flows" on cash, "in a manner that reconciles
beginning and ending totals". → rule 9, the footing.
- **230-10-45-25** (EY p. 8; ASU 2016-15 p. 10): entities "are encouraged
to report major classes of gross cash receipts and gross cash payments";
those that do "shall, at a minimum, separately report" (a) cash
collected from customers, (b) interest and dividends received, (c) other
operating cash receipts, (d) cash paid to employees and other suppliers,
(e) interest paid, (f) income taxes paid, (g) other operating cash
payments. → rule 5, the operating classes; the direct method is a
choice the standard encourages, not one it requires.
- **230-10-45-28** (EY p. 10; DART 3.1): the indirect method adjusts net
income to remove (a) deferrals and accruals of operating receipts and
payments, such as changes in receivables and payables, and (b) items
with no operating cash effect, including those "whose cash effects are
related to investing or financing cash flows, such as gains or losses on
sales of property, plant, and equipment". → rule 8's G and W.
- **230-10-45-29** (EY p. 7; DART 3.1): the reconciliation of net income
to operating cash is required with either method; it "shall separately
report all major classes of reconciling items", at a minimum the
changes in operating receivables, inventory and payables.
- **230-10-45-30** (EY p. 8; DART 3.1): with the direct method, that
reconciliation "shall be provided in a separate schedule." → rule 8.
- **230-10-50-3** (EY p. 47): investing and financing activities that
"affect recognized assets or liabilities but that do not result in cash
receipts or cash payments in the period shall be disclosed", narrative
or in a schedule. → rule 7.
- **230-10-50-4** (EY p. 47): its examples, among them: "converting debt to equity";
acquiring assets by assuming directly related liabilities; obtaining a
right-of-use asset for a lease liability (the old "capital lease"
wording, replaced); receiving a gift of an asset; exchanging noncash
assets or liabilities for others (also a beneficial interest obtained
in a securitization, not listed here). → rule 7's exchange inside one
section.
- **230-10-50-5** (EY p. 47): "Some transactions are part cash and part
noncash; only the cash portion shall be reported in the statement of
cash flows." → rule 3.
- **230-10-50-6** (EY p. 47): with only a few noncash transactions, they
may be on the same page as the statement; otherwise elsewhere, clearly
referenced to it. → the printed statement's noncash schedule.
- **830-230-45-1** (EY p. 81; DART 7.1): the effect of exchange-rate
changes on cash held in foreign currencies is reported as a separate
part of the reconciliation of the change in cash. → B-14's scope note
(single-currency books, R-5).
- **105-10-05-1, 05-2, 05-3** (read only in their 2009 text, ASU 2009-01
Appendix B, pp. 17-18, https://storage.fasb.org/ASU2009-01.pdf; the
current wording is not confirmed): the Codification is "the source of
authoritative generally accepted accounting principles"; where it does
not specify, an entity first considers principles for similar
transactions "and then consider[s] nonauthoritative guidance from other
sources"; practices not in the Codification are nonauthoritative
(sources include accounting textbooks, handbooks and articles). → rule
11: the Codification does not address payments made on the entity's
behalf (below), so this is where firm guidance comes in; rule 11
follows it (D-42), a choice the standard leaves open, not a requirement
of any paragraph.
Also read there, for the design (not authoritative, 105-10-05-3):
- DART 6.1.3 and EY 5.3.1 and 5.3.3 (equipment on account: payments soon
after purchase are investing, "soon" read by the SEC staff as three
months or less; the change in payables in the reconciliation leaves
out payables for investing; the noncash disclosure is the liability
that remains unpaid at the period's end). → rule 12.
- Payments a third party makes, or cash it receives, on the entity's
behalf (rule 11, D-42). No ASC paragraph addresses them: PwC Viewpoint,
Financial statement presentation 6.9.3 ("ASC 230 does not address these
situations"); KPMG Handbook, Statement of cash flows (March 2026)
Q8.3.10 ("Topic 230 does not directly address"); BDO Blueprint,
Statement of cash flows under ASC 230 (December 2025) 3.4 ("While ASC 230
is silent"); EY 4.6.2 ("we believe judgment will be needed"). Read
2026-10-20 for D-42, in each firm's public text (PwC
https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_6_statement__US/69_supplementary_cash.html;
DART https://dart.deloitte.com/USDART/home/codification/presentation/asc230-10/roadmap-statement-cash-flow/chapter-7-common-issues-related-cash/7-2-constructive-receipt-disbursement;
BDO https://arch.bdo.com/Statement-of-Cash-Flows-Under-ASC-230; EY as
above):
- **PwC 6.9.3.1** (Constructive receipts and disbursements): "a reporting
entity should include cash flows received or paid by a third party on
behalf of the reporting entity", as though through its own accounts.
Its examples: a transfer agent moving a new lender's proceeds to pay
off the old lender (gross up both), and a bank paying a vendor at the
entity's instruction ("a financing inflow for the receipt of the debt
proceeds", and an operating outflow for the vendor). "Judgment is
required."
- **DART Roadmap 7.2** (Constructive receipt and disbursement): when a
third party handles cash on the entity's behalf, the entity may have
constructive receipt or disbursement, because "the same economic
result would be achieved if the cash had been received by or disbursed
to" it directly. Inventory financed by an unrelated lender that pays
the supplier: a financing inflow and an operating outflow, repayments
financing; a mortgage lender wiring the seller: a financing inflow and
an investing outflow; Example 7-2, a lender paying an insurance
premium: an operating outflow for the premium and a financing inflow.
The contrast is a supplier's own finance subsidiary (AICPA Technical
Q&A 1300.16, and the SEC staff at the 2005 AICPA conference): a trade
loan, noncash.
- **BDO 3.4** (Constructive disbursements and receipts): among its cases,
"A parent might pay on behalf of a subsidiary expenses that are
recognized in the subsidiary's separate financial statements"; an
entity "generally should report constructive cash flows when it
contracts with a third party to act on its behalf (for example, a
transfer agent, investment bank, or lender) or when cash does not flow
through the entity's cash accounts for administrative convenience".
Example 3-5: a bank remitting the price of equipment to the supplier,
an investing outflow and a financing inflow, later principal payments
financing (citing TQA 1300.19); Example 3-6: a refinancing through an
agent, a financing inflow and outflow; Example 3-4: the supplier's own
finance subsidiary, noncash (TQA 1300.16).
- **EY 5.2.4 and 5.3.1**: inventory or equipment financed by a third
party (not the seller) is an operating or investing outflow and a
financing inflow; seller-financed purchases are noncash "to the extent
of the initial seller financing", disclosed under 50-3 to 50-6, and
later principal payments are financing whichever financed them.
- **KPMG Q8.3.10** accepts a noncash presentation (citing 50-3) for
property and equipment a lender pays for.
→ rule 11 (D-42): constructive receipt and disbursement for what a
member (through the members' financing account, or capital for an
expense) or a lender pays or receives for the company; noncash for
property a member already owned (50-4) and for the seller's own credit
(EY 5.3.1). The expense-to-capital case follows BDO 3.4's parent paying
a subsidiary's expenses, and the substance test of DART 7.2 and PwC
6.9.3.1, which turn on who paid whom, not on how the entity records
what it owes back.
## 606-10-55-36 through 55-38 (Revenue: principal or agent)
An entity controlling the specified good or service before transfer is