restricted cash

This Subtopic governs how depository and lending institutions offset and combine amounts on the balance sheet. Its core rules: unearned premiums and unpaid claims on credit life and credit accident and health insurance issued to finance customers are deducted from finance receivables in consolidation (or the net amount presented with adequate note disclosure), while unpaid claims on property and level term life insurance—and credit coverage on receivables owned by unrelated entities—must be presented as liabilities. Reciprocal balances with another financial institution are offset only if they will be offset in the process of collection or payment, and restrictions on cash balances must be disclosed.

This subtopic governs how health care entities, including not-for-profit business-oriented health care entities, present their balance sheets. The general rule is a classified (current/noncurrent) balance sheet under Section 210-10-45, except that a continuing care retirement community may instead sequence assets by nearness of conversion to cash and liabilities by nearness of maturity. It also specifies that contractually limited (non-donor) assets stay in net assets without donor restrictions, that interfund balances are eliminated, and that restricted or segregated cash is excluded from current assets.

ASC 230-10 governs the statement of cash flows, which every entity presenting both financial position and results of operations must provide for each period results of operations are presented (230-10-15-3). It requires cash receipts and payments to be classified as operating, investing, or financing activities and requires the statement to explain the change in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents (230-10-45-4, 45-10, 45-24). Operating cash flows may be presented by the direct method (encouraged) or the indirect method, but a business entity must reconcile net income to net cash flow from operating activities either way (230-10-45-25, 45-28, 45-29).

ASC 305-10 is the Overall subtopic of the Cash and Cash Equivalents topic, but its substantive content has been removed — the scope, overview, and implementation guidance paragraphs were superseded by Maintenance Update 2017-21 and ASU 2012-04. As a result, 305-10 today functions largely as a placeholder heading; the operative guidance on cash and cash equivalents lives elsewhere, principally in ASC 230 (definition and presentation of cash equivalents, restricted cash) and ASC 210 (balance sheet classification).

ASC 305-942 was the industry-specific guidance on cash and cash equivalents for depository and lending institutions (banks, savings institutions, credit unions). Every paragraph in the subtopic — scope, presentation, and disclosure — was superseded by Maintenance Update 2017-21, so the subtopic contains no operative guidance. Entities in this industry now apply the general guidance in ASC 305 and, for restricted/reserve balances and cash flow classification, ASC 942-305 and ASC 230.

ASC 305-946 was the investment-company-specific guidance on cash and cash equivalents. Every remaining paragraph (05-1, 15-1, 45-1, 45-2) was superseded by Maintenance Update 2017-21, so the subtopic contains no substantive guidance today. Investment companies now look to the general cash guidance in ASC 305 and to the presentation and disclosure requirements in ASC 946.

ASC 305-954 was the health care industry-specific guidance on cash and cash equivalents, but it now contains no operative content — every paragraph has been superseded or is unused. Health care entities therefore follow the general guidance in Topic 305 together with the broader health care presentation rules in Topic 954.

ASC 810-30 tells a sponsor how to account for a research and development arrangement in which the sponsor funds 100% of the R&D activities — typically by capitalizing a new entity (Newco) with cash and technology rights, spinning off Newco's Class A common stock to the sponsor's shareholders, and retaining a purchase option and nominal Class B shares. The sponsor reclassifies the contributed cash as restricted cash, recognizes R&D expense as the activities are performed, and records the Class A distribution as a dividend at the fair value of that stock. The Class A stock is presented as noncontrolling interest classified in equity but separate from the parent's equity, and exercise of the purchase option is accounted for like an acquisition of a noncontrolling interest.