P3: the cash flow statement by ASC 230 (defect 1, D-35, D-42)

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

docs/spec/sources/fasb-asc.md

@@ -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