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Building your cash flow statement in uncertain times · PwC's accounting podcast

• 0:00
  SPEAKER_01: Welcome to PWC's Accounting Podcast Series.
• 0:03
  SPEAKER_01: I'm Heather Horn, a partner in PwC's National Office and your host.
• 0:07
  SPEAKER_01: Today I'm happy to welcome Suzanne Stefani to the studio to talk about the statement of cash flows.
• 0:15
  SPEAKER_01: Suzanne, thanks so much for joining me to talk about the cash flow statement.
• 0:19
  SPEAKER_01: So I know this is an area where financial statement users have always placed a lot of importance on the statement when making decisions about a company.
• 0:28
  SPEAKER_01: And definitely now more than ever, given the impact of the pandemic, I think focus on liquidity is becoming more and more important.
• 0:37
  SPEAKER_01: So to get more insight into liquidity, many users are looking to the cash flow statement to try to get a good understanding of where a company's cash is coming from and where it's going.
• 0:48
  SPEAKER_02: Yeah, right.
• 0:49
  SPEAKER_02: It's even more of a focus now this year end because this statement gets to the heart of the cash, right?
• 0:55
  SPEAKER_02: There's such a big focus now with some companies struggling because of the pandemic.
• 1:00
  SPEAKER_02: So investors really want to know what's going on with the cash, right?
• 1:04
  SPEAKER_02: And investors have told us that they especially focus on operating cash flows, which some see as being the cash version of net income, if you will.
• 1:15
  SPEAKER_02: Because if you think about it, you know, with the indirect method, which most people use to get to operating cash flows, you take net income and you strip out all of those accruals like AR and AP and any non-cash items like depreciation.
• 1:30
  SPEAKER_02: So it really gives a different perspective on net income.
• 1:32
  SPEAKER_02: And I think investors and users really like to see that.
• 1:35
  SPEAKER_02: It's just something different than what they see in the PL.
• 1:38
  SPEAKER_01: I agree.
• 1:39
  SPEAKER_01: And I think, Suzanne, in particular, during 2020, we've seen a lot of companies that have entered into new types of transactions as a way to sort of address liquidity and to deal with operations.
• 1:50
  SPEAKER_01: And so, in particular, I've we've talked before about changes with debt arrangements, changes to leases, changes to cash management.
• 1:59
  SPEAKER_01: And all of these have led to cash flow statement questions.
• 2:02
  SPEAKER_01: So like to cover some of those today, starting with debt restructurings.
• 2:07
  SPEAKER_01: And I know that's something you and I have talked about before, that we've gotten questions on the presentation of fees associated with debt restructuring in the cash flow statement.
• 2:19
  SPEAKER_02: Right.
• 2:19
  SPEAKER_02: And how you present the fees in the cash flow statement, it really depends on the accounting for the transaction.
• 2:26
  SPEAKER_02: And when I'm talking about debt restructuring, I'm talking about situations when the lender remains the same before and after the transaction.
• 2:34
  SPEAKER_02: And in those transactions, the accounting can vary.
• 2:38
  SPEAKER_02: It can be accounted for in multiple ways depending on how the cash flows change with the new debt.
• 2:44
  SPEAKER_02: So one scenario is you could have a troubled debt restructuring, which unfortunately we're seeing a bit more of now with the pandemic.
• 2:52
  SPEAKER_02: So for a troubled debt restructuring, if you were to pay lender fees, those fees should be presented in financing.
• 3:00
  SPEAKER_02: If you pay third-party fees, legal fees, et cetera, those would be generally put in operating.
• 3:07
  SPEAKER_01: Okay.
• 3:07
  SPEAKER_01: And then Suzanne, I know from other talks we've talked about this that the accounting for a TDR can vary.
• 3:13
  SPEAKER_01: And sometimes it's a gain through the PL, and sometimes the change just goes through equity if it's a related party transaction, sometimes just a yield adjustment.
• 3:23
  SPEAKER_01: But so is the cash flow statement the same for all of these transactions?
• 3:27
  SPEAKER_02: In a TDR situation, yes.
• 3:29
  SPEAKER_02: So yeah, there can be a multitude of ways it's accounted for, but that we think the cash flow presentation should be the same, like I said, for all for all of them.
• 3:38
  SPEAKER_01: Okay.
• 3:39
  SPEAKER_01: But then, Suzanne, what if we don't have a TDR?
• 3:42
  SPEAKER_02: Yeah, so if we don't have a troubled debt restructuring, then not to get too much into the accounting, but you have to do a test to look at the change in cash flows.
• 3:50
  SPEAKER_02: It's a 10% test to figure out the accounting.
• 3:53
  SPEAKER_02: And remember, again, this is just when the lender is the same before and after the transaction.
• 3:57
  SPEAKER_02: So say you do that test and you have a change in cash flows of 10% or more, then it's accounted for as an extinguishment.
• 4:04
  SPEAKER_02: So in those cases, the lender fees are expensed and on the cash flow statement, we would put them as financing outflows.
• 4:12
  SPEAKER_02: And then the third-party fees are capitalized, and those would also be financing outflows on the cash flow statement.
• 4:18
  SPEAKER_02: So if you think about that, this is the same treatment as would be for a debt extinguishment that's outside of the debt restructuring model.
• 4:26
  SPEAKER_02: Like when you just pay off debt, it's the same treatment.
• 4:29
  SPEAKER_02: Now, if you did the test and you have a change of less than 10%, it's a modification.
• 4:35
  SPEAKER_02: So for that, the fees are accounted for a little differently.
• 4:38
  SPEAKER_02: So the lender fees are capitalized as a debt discount in that case, and they are presented in financing on the cash flow statement.
• 4:46
  SPEAKER_02: The third party fees are expensed, and we believe they should be put in operating on the cash flow statement.
• 4:51
  SPEAKER_02: And that's because one, they're expensed, and two, they're not really considered debt issuance costs here because there's no new issuance of debt.
• 4:59
  SPEAKER_02: It's just a modification.
• 5:00
  SPEAKER_01: So operating for those fees.
• 5:02
  SPEAKER_01: So, Suzanne, when you've been talking about these, you've mentioned multiple times that all of the explanations you've given so far is if it's the same lender.
• 5:12
  SPEAKER_01: But I know often when companies restructure their debt, it doesn't involve just existing lenders.
• 5:17
  SPEAKER_01: Um, they might be issuing new debt with the syndicate and then using the proceeds to pay off existing syndicated debt.
• 5:25
  SPEAKER_01: So, how should those types of transactions be thought about in the statement of cash flows?
• 5:30
  SPEAKER_02: Good point.
• 5:30
  SPEAKER_02: So it is actually very, very common, right?
• 5:32
  SPEAKER_02: We see a lot of restructuring with syndicated debt.
• 5:35
  SPEAKER_02: And so it's really common for the accounting to be kind of all over the board for the syndicated debt lenders here, because with a syndication, the accounting is assessed separately for each lender.
• 5:48
  SPEAKER_02: So you could have some lenders in that syndicate that are assessed under the debt restructuring model that I just talked about, right?
• 5:55
  SPEAKER_02: Because they were both in the old and the new syndicate.
• 5:59
  SPEAKER_02: But there might be other lenders that are completely new to the syndicate.
• 6:02
  SPEAKER_02: They weren't in the old debt.
• 6:04
  SPEAKER_02: So these are treated just like a new debt issuance, they're not part of the 10% test, and the cash flow treatment would just follow like you would for any new debt instrument.
• 6:12
  SPEAKER_02: And then also there could be lenders that just get paid off in the old debt and they don't get into the new debt at all.
• 6:18
  SPEAKER_02: So they're truly extinguished.
• 6:19
  SPEAKER_02: So again, they're not part of the 10% test, and they would just be treated on the cash flow statement like extinguished debt.
• 6:26
  SPEAKER_02: So when companies do the accounting for these, they have to allocate the fees to lenders, the lenders, and then apply the appropriate accounting model.
• 6:33
  SPEAKER_02: So you'd do the same thing for the cash flow statement here.
• 6:36
  SPEAKER_01: Okay, so then similarly, you could wind up in a situation where the fees are put in different categories on the cash flow statements for the same transaction.
• 6:45
  SPEAKER_01: Right, exactly.
• 6:46
  SPEAKER_01: Okay.
• 6:47
  SPEAKER_01: And then Suzanne, we kind of jumped into this assuming everyone would remember all of these different models you're talking about.
• 6:53
  SPEAKER_01: And I know maybe not top in line for everyone.
• 6:56
  SPEAKER_01: So definitely encourage people to check out our past podcast on the actual accounting for debt restructurings.
• 7:04
  SPEAKER_01: So then, Suzanne, staying with the theme of debt, let's move on to the cash flow presentation of revolvers.
• 7:11
  SPEAKER_01: And specifically, we've seen a lot of companies who have to draw down on their revolving line of credits this year to help with liquidity needs.
• 7:19
  SPEAKER_01: And for some companies, this is the first time they may have drawn down.
• 7:22
  SPEAKER_01: And for some, they borrow and draw down rather frequently, so maybe daily or weekly, et cetera.
• 7:29
  SPEAKER_01: And then you know they're borrowing, paying back, borrowing, paying back.
• 7:32
  SPEAKER_01: And so I know we get a lot of questions on if the borrowing screen payments under the revolvers should be shown gross, so that you showing both the inflows and the outflows, or net, so that you just kind of net together the obviously net amount that you received or paid.
• 7:50
  SPEAKER_02: Yeah, I think for all transactions, really, not just revolver borrowings, information about the gross amounts of cash receipts and payments during a period is generally more relevant than when you net those amounts.
• 8:02
  SPEAKER_02: Actually, the cash flow guidance also emphasizes gross rather than net cash flows.
• 8:07
  SPEAKER_02: But it the guidance does permit netting in certain circumstances.
• 8:12
  SPEAKER_02: So they list out three conditions you have to have in order to be able to net cash flows like that.
• 8:18
  SPEAKER_02: So the cash flows have to have quick turnover, they have to um occur in large volumes and have short maturities, so less than 90 days.
• 8:26
  SPEAKER_02: And that's usually the one that we kind of have to focus on quite a bit there.
• 8:31
  SPEAKER_02: So if you think about this or or apply that concept right to a revolver borrowing to see if you can net it.
• 8:37
  SPEAKER_02: So the cash flows for revolving lines of credit, they rarely do qualify for net reporting.
• 8:44
  SPEAKER_02: They do have quick turnover usually and they do occur in large volumes, but the one that kind of um prevents it is the contractual maturity.
• 8:53
  SPEAKER_02: So the contractual maturity of each individual borrowing is typically greater than 90 days, so it doesn't qualify for net reporting.
• 9:01
  SPEAKER_02: So that means the company would show all the borrowings in one line as a financing inflow and all of the repayments in another line as a financing outflow.
• 9:11
  SPEAKER_02: Now, this can be a little confusing because companies often do repay and borrow regularly, sometimes daily, sometimes weekly, but often there's no contractual requirement to do that.
• 9:24
  SPEAKER_02: It's just how they manage their liquidity.
• 9:26
  SPEAKER_02: And the focus here, again, like I said, is contractual maturity.
• 9:30
  SPEAKER_02: So intention or history of repayment doesn't really come into effect here.
• 9:35
  SPEAKER_01: Okay, so definitely a key point to keep in mind because I think you're right, people often look at how they're managing it and maybe haven't focused as much on maturity.
• 9:44
  SPEAKER_01: So something great to look at.
• 9:47
  SPEAKER_01: So then let's move on to another financing related topic.
• 9:51
  SPEAKER_01: And Suzanne, this is one we've talked about a few times in other contexts, which would be supply chain financing.
• 9:59
  SPEAKER_01: And this is again something we've seen more in the pandemic as companies maybe are struggling to make payments on vendor payables.
• 10:07
  SPEAKER_01: And so they're maybe getting more creative with pushing out payment terms in a variety of ways, which also raises more questions on the cash flow statement.
• 10:16
  SPEAKER_01: So then, Suzanne, can you just run through a few of the scenarios we're seeing and how those should be presented on the cash flow statement?
• 10:23
  SPEAKER_02: Yeah, sure.
• 10:23
  SPEAKER_02: So before I get into traditional supply chain financing that you may be hearing a lot about lately, I'll just get into some more basic scenarios because we're even seeing these two.
• 10:34
  SPEAKER_02: So the first one is bank financing.
• 10:36
  SPEAKER_02: So we've seen companies as a way to kind of manage cash flow go to a bank to get direct financing to pay off some of their vendor payables, you know, kind of being able to push out maturities in a way.
• 10:50
  SPEAKER_02: In this case, um, the financing from the bank would would clearly be debt on the company's books and the payable would be relieved.
• 10:57
  SPEAKER_02: But sometimes in these cases, a company can arrange for the bank to pay the vendor directly.
• 11:03
  SPEAKER_02: So the cash um never hits the company's bank account, right?
• 11:07
  SPEAKER_02: It goes right to the vendor.
• 11:09
  SPEAKER_02: So the question that comes up on the statement of cash flows is that some are asking or thinking, you know, this must be a non-cash transaction because nothing went in and out of my bank account, right?
• 11:20
  SPEAKER_02: Because it went right to the vendor to pay off.
• 11:23
  SPEAKER_02: So they're, you know, thinking it might be appropriate to not show anything on the face of the cash flow statement.
• 11:29
  SPEAKER_02: But in these cases, the bank here is really acting as the agent for the company, right?
• 11:34
  SPEAKER_02: The bank could have sent the cash directly to the company and the company could have paid the vendor directly, but they just ended up structuring it to keep themselves out of the cash.
• 11:43
  SPEAKER_02: But we don't see this as a non-cash transaction.
• 11:46
  SPEAKER_02: Instead, we would apply the constructive receipt and disbursement concept.
• 11:50
  SPEAKER_02: So that concept, and you've probably heard us talk about it before, but basically the company should include any cash flows received or paid by an agent on their behalf as though the transaction took place through their own bank account.
• 12:03
  SPEAKER_02: So if we had two separately negotiated cash transactions with different, you know, third parties and they happen at the same time, and the company has a party that owes it cash, wire the cash to a party to which the company owes cash, then we think separate presentation of the two cash transactions on the cash flow statement most appropriately reflects the substance of the transaction.
• 12:26
  SPEAKER_02: So getting back to my kind of simple example, the company would have to show an operating outflow for the repayment of the AP and then a financing inflow for the financing received from the bank.
• 12:38
  SPEAKER_02: So they are going to put it on the cash flow statement, right?
• 12:41
  SPEAKER_02: Because if they did it, they they would show no operating outflow, right, for the repayment of that vendor payable.
• 12:48
  SPEAKER_01: And then, Suzanne, how about a case where instead of involving the bank, they just have the vendor itself extend the payable terms and make it more into like a long-term payable?
• 12:58
  SPEAKER_01: How would that be handled on the cash flow statement?
• 13:01
  SPEAKER_02: Yeah, so in this situation, we only have two parties here, right?
• 13:04
  SPEAKER_02: We don't have an agent like we had in the other example.
• 13:07
  SPEAKER_02: So in this case, we would not gross up the cash flow statement when the payable is changed to debt here with the vendor.
• 13:15
  SPEAKER_02: But instead, when the payments are actually made on that debt with the vendor, the payment should be presented in operating because it originally stemmed from this vendor payable.
• 13:25
  SPEAKER_02: And this is consistent with the cash flow guidance that actually states that payments on long-term vendor payables should be presented in operating cash flows.
• 13:34
  SPEAKER_02: So you might see a theme here in these two examples, but it's like you always want to make sure you get that operating cash flow, right?
• 13:40
  SPEAKER_02: Outflow.
• 13:41
  SPEAKER_02: You can't avoid it just because of the way you structured something, right?
• 13:45
  SPEAKER_01: Right.
• 13:46
  SPEAKER_01: So then, Suzanne, now let's go back to my original question on supply chain.
• 13:51
  SPEAKER_01: And I know that the FastBase taking up a project on disclosure of supply chain finance programs.
• 13:57
  SPEAKER_01: So this sounds a little bit about what you were talking about in your first example, but I think it's obviously also a little different.
• 14:03
  SPEAKER_01: So can you explain that to us?
• 14:04
  SPEAKER_02: Yeah, so what I was talking about earlier was the more direct scenario, right?
• 14:08
  SPEAKER_02: Where you go to a bank and you actually get financing and you turn around and pay off the vendor payable.
• 14:14
  SPEAKER_02: But when we talk about supply chain financing, they can be take on a variety of forms, right?
• 14:20
  SPEAKER_02: And they're getting a lot of attention lately because they're becoming pretty popular.
• 14:23
  SPEAKER_02: Typically, the program's going to involve the company, its vendor, and then a bank, or or maybe some other type of financial institution.
• 14:31
  SPEAKER_02: And they usually involve an administrative paying agent, service contract, a financing agreement, or it could even be called some sort of factoring arrangement.
• 14:40
  SPEAKER_02: And like I said, they're becoming really popular as companies are needing to manage their liquidity and they're using companies are using these arrangements to take advantage of early payment discounts or sometimes just to simply push out the maturity of the payable.
• 14:53
  SPEAKER_02: So the key accounting determination here really is whether the structured payable should be classified as a payable still or debt on the balance sheet.
• 15:02
  SPEAKER_02: Um, and that can have, of course, impacts obviously the balance sheet, but also the cash flow statement.
• 15:07
  SPEAKER_02: And this determination, it really depends on the facts and circumstances of each arrangement.
• 15:12
  SPEAKER_02: But back to the question you asked me originally about the FASB project.
• 15:16
  SPEAKER_02: So as these programs are becoming more and more prevalent, many investors have raised concerns that companies aren't really transparently disclosing these programs.
• 15:27
  SPEAKER_02: And so they have a concern that a company's liquidity position could be misunderstood if there's a lack of transparency, you know, if a company has this type of program, especially when the structured payable continues to be labeled as a payable on the balance sheet as opposed to debt.
• 15:43
  SPEAKER_02: So that's why the FASB decided to take on a project to address this more formally.
• 15:48
  SPEAKER_02: But right now it's currently in initial deliberations.
• 15:52
  SPEAKER_01: Okay, so then Suzanne sounds like people should obviously stay tuned for the FASB project, but in the meantime, for this year end, it's going to be most important to make sure you're appropriately treating these programs as payables or debt, and then that you have transparent disclosure.
• 16:08
  SPEAKER_01: And for help in making that payable versus debt assessment, I definitely encourage companies to check out chapter 11 of the FSP guide for more information.
• 16:18
  SPEAKER_02: It's not something to wait for standard setting here.
• 16:21
  SPEAKER_02: You should, you know, look at these now for this year end.
• 16:24
  SPEAKER_02: The SEC had even weighed in on this back in 2019 and said that it's important to have transparency over these programs.
• 16:31
  SPEAKER_02: And they have been the subject of several comment letters as well.
• 16:34
  SPEAKER_02: So it's important to be transparent this year end.
• 16:37
  SPEAKER_01: All right, thanks for that, Suzanne.
• 16:39
  SPEAKER_01: So then let's move on to another topic you and I have spent a lot of time talking about, which would be lease modifications and terminations.
• 16:47
  SPEAKER_01: And as we've spoken about in past podcasts and webcasts, during 2020, we saw a lot of companies that were making changes to their lease agreements, particularly with real estate leases and you know, including modifications, terminations, concessions, et cetera.
• 17:03
  SPEAKER_01: So, what should companies keep top of mind here when considering the cash flow statement and related disclosures?
• 17:10
  SPEAKER_02: One thing to remember here is that a lot of those things you mentioned, right?
• 17:15
  SPEAKER_02: Modifications, terminations, even rent concessions in some cases, they can result in these adjustments to the lease liability and the right of use asset that are non-cash, right?
• 17:26
  SPEAKER_02: And just a reminder that any non-cash change to these accounts, the right of use asset and the lease liability, anything that doesn't relate to the single lease expense has to be disclosed as a non-cash transaction.
• 17:39
  SPEAKER_02: And the reason I bring that up is because that was a change with the new leasing guidance, right?
• 17:43
  SPEAKER_02: We've never had to disclose non-cash operating transactions before, but now we have to, and we're just seeing more of these non-cash adjustments.
• 17:52
  SPEAKER_02: So just wanted to make sure people remember to disclose them.
• 17:57
  SPEAKER_02: Also, sometimes there is a termination fee or a modification fee that that's paid in conjunction with these transactions.
• 18:04
  SPEAKER_02: And the accounting can vary depending on the transaction.
• 18:07
  SPEAKER_02: But the key thing to keep in mind is whenever you make these payments, they're really just a lease payment.
• 18:12
  SPEAKER_02: So you treat them like any other lease payment.
• 18:14
  SPEAKER_02: So if you have an operating lease, you treat it as an operating cash outflow.
• 18:18
  SPEAKER_02: And I think sometimes there's a question because sometimes when you have a modification or a termination, that termination penalty that you pay, it gets capitalized into the right of use asset.
• 18:30
  SPEAKER_02: So questions were coming up on where does this go in the cash flow statement?
• 18:34
  SPEAKER_02: Because it's getting capitalized.
• 18:35
  SPEAKER_02: But really just think of it as a lease payment and follow the same treatment.
• 18:39
  SPEAKER_02: So again, operating lease goes to operating cash flows.
• 18:42
  SPEAKER_01: Okay, so then Suzanne, sticking with our theme of liquidity, let's move on to another area where people may be looking for additional liquidity, which we talked about structuring payables to improve liquidity, but we also see cases where a company may be selling or factoring trade receivables to banks or asset back commercial paper conduits.
• 19:04
  SPEAKER_01: So what are the cash flow considerations in those circumstances?
• 19:08
  SPEAKER_02: So usually in these cases, when you sell AR, a lot of times the seller doesn't receive the entire purchase price in cash at the transfer date, right?
• 19:16
  SPEAKER_02: Instead, they usually only receive a portion of the purchase price up front in cash.
• 19:21
  SPEAKER_02: And then they have a receivable from the bank or the conduit for the difference.
• 19:25
  SPEAKER_02: And usually the repayment of that receivable is contingent on the subsequent collections of the underlying trade receivables that were sold.
• 19:34
  SPEAKER_02: And this receivable, it's typically referred to as a beneficial interest in the trade transferred trade receivables, or it's commonly referred to as a deferred purchase price, or you might hear DPP, right?
• 19:46
  SPEAKER_02: So on the cash flow statement, of course, the initial upfront cash received for the sale of the AR is operating cash inflow.
• 19:54
  SPEAKER_02: But the receipt of that receivable, so the beneficial interest or the DPP, should be disclosed as a non-cash investing activity on the sale date.
• 20:03
  SPEAKER_02: And then when you get any subsequent cash receipts from the payments received from the beneficial interest, those are investing inflows.
• 20:12
  SPEAKER_01: Okay, so then Suzanne, simplistically, if you the initial amount of cash to receive is similar to if you just receive cash from your customers and you would record that as operating, but then any subsequent cash as a result of the deferred purchase price, then that would go into investing.
• 20:29
  SPEAKER_01: Yeah.
• 20:30
  SPEAKER_01: Okay, good.
• 20:31
  SPEAKER_01: So Suzanne, then let me ask a follow-up question because I know that this can get very complicated very quickly because companies often have revolving arrangements, and so that the cash payments that the company is receiving from the bank or conduit are both include both amounts for the daily sale of AR as well as collections on previously sold AR.
• 20:52
  SPEAKER_01: So maybe includes amounts that would both be operating and investing.
• 20:56
  SPEAKER_01: So, how do you think about that?
• 20:58
  SPEAKER_02: Yeah, um, we have seen many cases where there are daily sales and the tracking of each of those components, like you just discussed, can be really complex.
• 21:08
  SPEAKER_02: So we think companies need to track the cash received each day, and the cash received for the payment of the day's transfers would be applied first, and then any excess cash would be treated as part of the DPP.
• 21:20
  SPEAKER_01: Okay, so Suzanne, I can just visualize how complicated this would get very fast.
• 21:26
  SPEAKER_01: And it's obviously going to be important as always for the accountants to understand the actual transaction and the terms of these arrangements.
• 21:35
  SPEAKER_01: Um, I do know as well that we have a good example in chapter six of the FSP guide that goes through very in a very detailed way with numbers.
• 21:44
  SPEAKER_01: So, to the extent, if you're listening and you're dealing with something like this, I would highly encourage you to check that out.
• 21:51
  SPEAKER_01: Um, okay, so then Suzanne, I know we've talked about some different significant types of transactions today that were sort of specific to things that we've seen in 2020.
• 22:00
  SPEAKER_01: 2020.
• 22:01
  SPEAKER_01: I also know though that you get just a lot of cash flow questions on an ongoing basis, and that often those questions are tending to come up very late in the game.
• 22:12
  SPEAKER_01: So it's like near the end of the close, maybe even very near the time that you're trying to file your financial statements.
• 22:18
  SPEAKER_01: So what do you recommend in those circumstances?
• 22:22
  SPEAKER_02: Yeah, so it does seem sometimes that cash flow reporting is not always top of mind during the quarter, but rather it's something that's thought about more during the close.
• 22:32
  SPEAKER_02: So sometimes that can cause issues or sometimes last-minute surprises about a cash flow treatment, right?
• 22:38
  SPEAKER_02: So when there are significant transactions, it's a good idea to discuss the cash flow treatment real time.
• 22:45
  SPEAKER_02: At the same time, the accounting treatment is being discussed, you know, while the details are still fresh.
• 22:50
  SPEAKER_02: And I know there's a lot going on, you know, with the accounting and everything, but it's a it's always a good idea to kind of get ahead of the cash flow too, while things are top of mind.
• 22:58
  SPEAKER_02: Because by the time the close comes along, sometimes the person preparing the cash flow statement might not be as clear on the details of the transaction.
• 23:06
  SPEAKER_02: And, you know, they really need that to make the right cash flow classification.
• 23:10
  SPEAKER_02: And it even gets more complicated sometimes because the ERP systems don't always capture, you know, all the information that are needed to make the right call in the cash flow statement.
• 23:19
  SPEAKER_02: So always a good idea to get ahead of it if you can.
• 23:22
  SPEAKER_01: Okay, so sounds like some good advice for 2021 as companies look ahead.
• 23:27
  SPEAKER_01: And then in the meantime, definitely encourage people to check out chapter six of the FSP Guide for more information, or they can also check out our podcast from last year, which talks about some other types of transactions compared to what we talked about today.
• 23:42
  SPEAKER_01: So, Suzanne, as always, thank you for joining me.
• 23:45
  SPEAKER_01: As you know, um I do always like to wrap things up with a lighter question.
• 23:50
  SPEAKER_01: And since it's January, I'm very focused on New Year's resolutions.
• 23:55
  SPEAKER_01: And so it's this is a dual part question.
• 23:57
  SPEAKER_01: It's first of all, what's your view on New Year's resolutions?
• 24:00
  SPEAKER_01: Are you pro or con?
• 24:02
  SPEAKER_01: And if you're pro, um, are you willing to share any resolutions for this year?
• 24:07
  SPEAKER_02: Yeah, I think I'm pro.
• 24:08
  SPEAKER_02: It was like a the chance to make a new resolution, even if I don't always keep them.
• 24:13
  SPEAKER_02: And yeah, this year I'm trying to be more organized and like tidy up around the house.
• 24:19
  SPEAKER_02: So I've been sitting here in my house since March looking at files of clutter and always like, yeah, yeah, I'm gonna do that.
• 24:26
  SPEAKER_02: And I haven't gotten around to it yet, but I'm hoping for 2021 that I'm gonna do it.
• 24:34
  SPEAKER_02: Actually, I did organize my basement already, and that gave me encouragement.
• 24:38
  SPEAKER_01: Sounds like a great resolution.
• 24:39
  SPEAKER_01: So I wish you the best of luck with that.
• 24:42
  SPEAKER_01: Thanks again for joining me.
• 24:45
  SPEAKER_01: Join me back here every Tuesday for new episodes on all things accounting and reporting.
• 24:51
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• 25:02
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• 25:07
  SPEAKER_01: For PWC, I'm Heather Horn.
• 25:10
  SPEAKER_01: Thanks for tuning in.
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