As part of the upcoming changes to FASB guidance, the statement of cash flows will look a little different. Going forward, nonprofits can still choose to present it using either the direct or indirect method for cash flows provided (used) by operating activities. If you use the direct method, you will no longer need to reconcile it to the indirect method.
Edit 10/7/17: The following paragraphs were based on an exposure draft and include details that were not part of the final FASB guidance. They should be disregarded.
Certain types of cash flows will also be classified differently under the new guidance. 3 items, currently identified as investing cash flows, will now be presented as operating cash flows – purchases of long-lived assets, contributions restricted to acquire long-lived assets, and sales of long-lived assets. Currently listed as operating cash flows, but moving to financing cash flows, are those resulting from interest payments on borrowings. Currently listed as operating cash flows, and moving to investing cash flows, are receipts of interest and dividends on loans and investments, except those made for programmatic purposes.
Per FASB, the goals of these changes are to make the statement more understandable to creditors, donors, and others who use it, and the changes to classifications are part of the new guidance’s notion that operating activities are defined by whether uses of resources are related to, or directed at, carrying out the organization’s mission.
As the transition is made to the new guidance, users of financial statements should keep in mind the new classifications for the various types of cash flows affected. This will impact the comparability of statements issued going forward, to those that have been issued in the past, so a reconciliation will be necessary if you’re reviewing statements from multiple years.