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9/30/2014 Private Cash Flow Statements 2014-2015 NACUBO Intermediate Accounting Learning Objectives • Identify the GAAP guidance for the preparation of the cash flow statement • List the components of the statement • Describe the items included in each component of the statement • Assemble the information necessary to prepare the cash flow statement 1 9/30/2014 GAAP Basis • FASB No. 95 required for public entities • FASB No. 117 modified FASB No. 95 to require direct or indirect method cash flow statement for notfor-profits • FASB issuing new guidance to require direct method for not-forprofit entities Cash Flow Information • Identifies the ability to meet obligations when they are due • Used to determine if the institution needs external financing • Can be used to project future cash flows 2 9/30/2014 Information Should Help Users • determine the reasons for differences between operating income and associated cash receipts and disbursements • assess the effects of the financial position of both cash and noncash investing, financing and capital transactions during the fiscal year Private C & U Concerns • Three categories per FASB # 95 – Operating activities – Financing activities – Investing activities • Operating activities must be presented using direct method – Required reconciliation presents the indirect operating activities • Gross data no netting of ins and outs • Significant differences from GASB Model 3 9/30/2014 Definition of Cash • Cash on hand and in banks • “Near cash” – investments with maturities of 90 days or less • Can exclude deposits with debt service trustee • Can exclude cash on hand in investment portfolio • Include definition in Significant Accounting Policies note disclosures Required Presentation Format • Cash flows from ‘various’ activities • Operating • Financing • Investing • Net increase (decrease) in cash • + Cash and equivalents Beg of Year • = Cash and equivalents End of Year 4 9/30/2014 Statement of Cash Flows Baylor University Using the current indirect method BAYLOR UNIVERSITY Statements of Cas h Flows For the Years Ended May 31, 2013 and 2012 (in thousands of dollars) Year Ended May 31, 2013 CASH FLOWS FROM OPERATING ACTIVITIES Change in net as sets Adjus tments to reconcile change in net ass ets to net cash provided by (us ed for) operating activities : Depreciation Return on long-term inves tments Distributions from long-term investments Amortization of bond premium Losses on disposal of property & equipment Fixed as sets gifts -in-kind Contributions for endowment & plant improvements Provision for bad debts Changes in ass ets & liabilities: Short-term inves tments Student accounts receivable Contributions receivable Grants & other receivables Prepaid expens es & other Accounts payable Pers onnel related current liabilities Depos its & deferred revenue Accrued postretirement benefits Other liabilities Net cas h provided by (us ed for) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Student loans made Proceeds from collections of student loans Proceeds from s ales of long-term inves tments Purchases of long-term investments Unexpended bond proceeds increase Purchases of property, plant & equipment Net cas h us ed for investing activities CASH FLOWS FROM FINANCING ACTIVITIES Contributions for endowment & plant improvements : Endowment Plant Proceeds from long-term debt Repayment of long-term debt Increase in federal student loan funds refundable Net cas h provided by financing activities Net increas e in cas h & cas h equivalents $ Mi41 Cas h & cas h equivalents at beginning of year Cas h & cas h equivalents at end of year Year Ended May 31, 2012 $ OM 31,046 (125,209) 58,672 (953) 4,563 (164) (108,730) 2,087 30,937 25,486 56,382 (950) 1,649 (286) (83,555) 1,432 (46,242) (1,817) (64,062) (5,759) (1,776) 17,206 1,670 13,015 6,756 (4,194) (19,050) 6,331 (776) (41,958) (2,131) (940) 15,237 1,256 6,013 688 7,818 20,843 (855) 845 39,826 (73,086) (21,497) (175,399) (230,166) (1,520) 1,506 20,970 (53,247) (104,592) (69,807) (206,690) 24,922 83,808 200,652 (5,961) 14 303,435 54,219 30,121 53,434 132,027 (21,376) -194,206 8,359 49,205 $ 103,424 $ 40,846 49,205 5 9/30/2014 Cash Flows from Operations • Displays Net Asset change – then adjusts for noncash transactions and change in working capital accounts • New direct method – Cash inflows by major source (tuition, research activities, investment, auxiliaries, etc. • Cash outflows by natural object (salaries, payments to vendors, etc.) Cash Flows from Operations – The Direct Method • New FASB will require direct method comparable to GASB format • Provides more complete information to statement reader • Enables projections based on assumptions • Generally rather difficult to compile because institutional systems don’t contain required attributes in readily extractable format • Current 10% or less of all privates use direct method (tend to be large, research institutions audited by national audit firms) 6 9/30/2014 Cash Flows from Operations – Reconciliation (Indirect Method) • Presently not being considered for presentation in Cash Flow Statements for Private institutions Cash Flows from Operations – Reconciliation (Indirect Method) • Required by GASB No. 34 for Public institutions • Most privates currently use the indirect method although the direct method is an option • Indirect method obscures operating cash inflows and outflows • Cannot be used to project future cash flows 7 9/30/2014 Cash Flows from Noncapital Financing Activities • Private institutions do not have this category • Items included in other categories – Operations • Transfers to and from • Agency transactions • Direct student loans – Financing • New endowment gifts • Annuity gift transactions • Debt proceeds and payments Cash Flow from Financing • Inflows include new debt proceeds, contributions restricted to capital acquisitions (current GAAP), new endowment and other gift • Outflows include capital bond, mortgage and note principal payments, capitalized lease payment, capital debt interest payments, capital acquisitions and capital item sale proceeds 8 9/30/2014 Cash Flows from Investing • Includes transaction related to traditional financial investments • Investment portfolio transactions must be displayed gross – purchases should not be offset against sales/maturities • Interest income will become part of this activity rather than operating Cash Flows from Investing • For purposes of this statement, short-term investments that are not cash equivalents are considered investments 9 9/30/2014 Retrieve Private Worksheet Exhibits in Handouts ABC University Preparing the Cash Flow Statement • Start with BOY and EOY comparative balance sheet Exhibit 1 • Gather additional information as needed Exhibits 2, 3 and 4 – – – – Gross investment purchases and sales Gross loan activity Increase in restricted contributions Separate unrealized and realized investment gains into restricted and unrestricted – Gross plant additions and deletions – Distribution of cash disbursements by natural class 10 9/30/2014 ABC University Statement of Financial Position June 30, 20X4 (amounts in thousands) Prior year Assets Cash and equivalents Restricted cash Accounts receivable Predge receivable Inventories Prepaid expenses Student loans Notes receivable Investments Capital assets, net Total assets current year year to year change Ref 34,435 6,659 35,094 24,034 3,381 3,788 15,651 56,536 596,674 482,335 1,258,587 28,175 7,791 42,238 21,286 3,155 3,816 14,449 27,315 642,900 563,793 1,354,918 (6,260) 1,132 7,144 (2,748) (226) 28 (1,202) (29,221) 46,226 81,458 96,331 A B C D E F G H I J Liabilities Accounts payable Short‐term notes payable Accrued payroll Compensated absences Liability re security lending Other liabilities Prepaid revenue and student deposits Long‐term debt OPEB obligations Federal student loans Total liabilities 19,712 15,000 9,440 10,634 7,234 40,638 15,990 355,399 78,523 11,724 564,294 16,540 9,827 11,298 8,082 36,401 17,647 380,966 71,781 11,487 564,029 (3,172) (15,000) 387 664 848 (4,237) 1,657 25,567 (6,742) (237) (265) K L M N O P Q R S T Net assets Unrestricted Temporarily restricted Permanently restricted Total net assets 492,091 62,700 139,502 694,293 583,150 64,183 143,556 790,889 91,059 1,483 4,054 96,596 U V W X ABC University Statement of Activities For the Fiscal Year July 1, 20X3 to June 30, 20X4 (amounts in thousands) Ref. Revenues Student tuition and fees (net Private grants Private gifts Endowment gifts Government grants Investment income Residential life Total revenues 199,552 45,903 506 3,205 77,307 68,143 90,004 484,620 1 2 3 4 5 6 7 Expenses Salaries and benefits Benefits Interest expense Depreciation Residential life Services and maintenance Supplies Utilities contractual servies Total expenses 167,087 60,500 15,223 24,259 10,992 46,935 12,703 16,527 46,805 401,031 8 9 10 11 12 13 14 15 16 Other Gain on swap Recognized OPEB gain Loss on bond retirement Total other 6,421 8,807 (2,221) 13,007 17 18 19 Change in net assets 96,596 X 11 9/30/2014 ABC University Analysis of Capital Assets and Long‐term Debt for the fiscal year ended June 30, 20X4 (amounts in thousands) Capital assets Buildings Equipment Land and improvements Ligrary holdings Construction in progress combined total Beginning 473,007 125,480 76,997 60,959 38,538 774,981 Additions Reductions 105,717 3,271 Ending 523,474 131,536 85,673 63,810 72,934 877,427 Depreciation 292,646 24,259 3,271 313,634 Capital assets net 482,335 81,458 ‐ 563,793 Long‐term debt Notes and term loans Revenue bonds: Defeased debt Revenue Bonds Bond premium long‐term debt Beginning Additions Reductions Ending 73,954 2,099 71,855 27,430 252,670 1,345 355,399 27,430 9,665 746 39,940 ‐ 300,515 8,596 380,966 57,510 7,997 65,507 Analysis Long‐term debt additions and deductions. Debt additions: used for defeased bond 27,430 new debt 30,080 Premium 7,997 65,507 total addition Reductions: defeased debt obligation 25,209 defeased loss 2,221 premium amort 746 payments bonds & notes 11,764 total reduction 39,940 57510 FN 2 7997 FN 3 746 39,194 FN 4 ABC University Analysis of Various Receivable, Payable and Other Accounts for the fiscal year ended June 30, 20X4 (amounts in thousands) Accounts receivable Student fees and tuition Grants and contracts other total Notes receivable Facilities Student loans total notes receivable Accounts payable contract services supplies contractual utilities Total prepaid revenue tuition and fees residential life other prepaid Total Investments Matured during FY Purchased during FY Gift inv released Grant restricted for investment Gift restricted for investment Analysis of investment revenue Investment income realized gain (noncash) Reported in statement of activity Prior year 3,798 27,170 4,126 35,094 Current year 5,033 33,356 3,849 42,238 Difference (1,235) (6,186) 277 (7,144) Ref. a 1 a 2 a 3 56,536 27,315 29,221 15,651 14,449 1,202 72,187 41,764 30,423 a 4 a 5 8,199 1,919 2,616 6,978 19,712 6,341 1,654 2,205 6,340 16,540 1,858 265 411 638 3,172 a 6 a 7 a 8 a 9 10,260 4,530 1,200 15,990 (1,065) a 10 (592) a 11 ‐ a 12 (1,657)Q on fin pos 672,317 661,740 3,719 832 394 11,325 5,122 1,200 17,647 Ref a 13 a14 a 15 a 16 a 17 12,504 55,639 68,143 a 18 6 12 9/30/2014 Preparing the Cash Flow Statement • Categorize each of the above amounts into the appropriate Cash Flow categories • Complete the Statement of Cash Flows • Exhibit 5 – Note this exhibit adds to the left Operating activities Studend tuition and fees private grants Private gifts government grants investment income residential life 199,382 45,071 6,856 71,121 6,083 90,596 199,552 45,903 506 77,307 68,143 90,004 Ref 1 2 3 5 6 7 salaries benefits interest expense residential life services and maintenance Supplies Utilities Contractual services Cashflow from operating activities (167,474) (59,099) (15,223) (10,992) (44,556) (12,770) (17,165) (47,216) 44,614 (167,087) (60,500) (15,223) (10,992) (46,935) (12,703) (16,527) (46,805) 8 9 10 12 13 14 15 16 Investing activities Investment sales proceeds Investment purchases Acquisition of Properity, plant and equip Private grant restricted for investment Cashflow from investing activities 672,317 (661,740) (105,717) 300 (94,840) 672,317 (661,740) (105,717) (832) A13 A14 FN1 A16 Financing Government advance for federal loans decrease Endowment Restricted gifts Notes receivable Student notes receivable Notes receivable payments Bond proceeds Bond payments New Bond premium Cashflow from financing activities (237) 3,599 29,221 1,202 (15,000) 57,510 (39,194) 7,997 45,098 (237) 3,205 29,221 1,202 (15,000) 57,510 (39,194) 7,997 T 4 H G L FN2 FN4 FN3 Change in cash balances (5,128) (6,260) A Components Ref Ref (1,235) A1 (832) A16 2,748 D 277 A3 (6,186) A2 (55,639) a18 (387) (664) M N (6,742) S 4,237 226 P E (28) F 1,132 B 394 a17 Ref 1,065 a10 Ref 3,719 a15 (394) a17 (6,421) 17 592 a11 8,807 (1,858) (265) (638) (411) 18 A6 A7 A9 A8 1,132 B Beginning Cash Balance 41,094 34,435 X3C&E 6,659 X3RC Ending Cash Balance 35,966 28,175 X4C&E 7,791 X4RC 13 9/30/2014 Exercise for your use • Using the information in the Exhibits – Trace the preparation of the Cash Flow from Operations section to the statement – Trace the preparation of the Cash Flow from Financing section to the statement – Trace the preparation of the Cash Flow from Investing section to the statement • Review statement details Learning Assessment • What are the categories in the Statement of Cash Flow? • What information is reported as operating activity? • Nonoperating activities include what cash receipts and disbursements? • Where are student Perkins Loan activities reported in the Statement of Cash Flow? • What GAAP guidance directs the preparation of the Statement of Cash Flow? 14 9/30/2014 Questions? Thank you ! 15