M e m o r a n d u m Date: July 4, 2011 To: Troy Cortez From: Jasmine Hill Subject: Cash Flow Classifications Three instances in the past year required extra research when determining their classifications on the statement of cash flows: insurance settlement proceeds on a building destroyed by a tornado, sale of accounts receivable as a securitization vehicle, and acquisition of property, plant, and equipment on account to be paid in January. A comparison of the SFAS No. 95 and the FASB Accounting Standards Codification was used to determine the proper treatment in each case. Insurance Settlement Proceeds According to standards before the Codification, cash from operating activities included “proceeds of insurance settlements, except for those that are directly related to investing or financing activities, such as destruction of a building,” (FAS 95 par. 22 (c)) but since this is related to PP&E this should be an investing activity. The Codification agrees with prior standards that this should be classified as an investing activity. “Receipts from sales of property, plant, and
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