¶ … Flow Inc.

Insurance settlement proceeds are treated as operating cash flows under ASC 230. Thus the receipt of the $20 million would be operating. The investment of the $20 million into the company's pension fund would also be an operating cash flow. While normally investing money into the market is considered an investment flow, that is only when the beneficiary in the corporation. In this instance, the beneficiaries are the company's employees and the defined-benefit plan is a form of employee compensation. All employee compensation is considered an operating cash flow under ASC 230.

The flow should not be classified as an investing cash flow for two reasons. The first is that all insurance disbursements are classed as operating flows. The second is that employee benefits are also operating flows. If the funds were used to rebuild the facility, then that spending may be classed as an investing flow. However, that is not the case as the funds are being used for the benefit of the employees and are therefore not considered capital flows subject to depreciation.

The timing of these flows would be in the current year. The defined benefit plan is subject to its own tax treatment upon disbursement of the funds at a future date, but the $20 million deposit into this fund is considered current for the purposes of the company's statement of cash flows.

II. According to ASC 230, the transaction relating to the acquisition of the manufacturing equipment and machinery would not be reflected on the statement of cash flows in the current year. It would only be reflected next year, when the cash flow actually occurs. The transaction would show on the balance sheet and income statement, but as non-cash items. The cash flow statement is only for cash flows, so non-cash items are reconciled from the statement. In this cash, the timing of the transaction for the purposes of the statement of cash flows is next year, assuming that is when the payment is made.

Works Cited:

No author (2010). U.S. GAAP accounting standards: 230: Statement of cash flows. Accounting Info.com. Retrieved December 6, 2010 from http://accountinginfo.com/financial-accounting-standards/asc-200/230-cash-flows.htm