Restricted Cash and Tesla’s Restated Acquisition Cash Flows
Summary
The note explains why Tesla’s reported 2016 cash-flow figure for business combinations, net of cash acquired, differs between its original 2016 filing and the comparative figures in its 2018 filing. It attributes the change to adoption of a Financial Accounting Standards Board rule on restricted cash, applied retrospectively. The accounting change brought restricted cash into the cash and cash-equivalent balances used to reconcile cash flows.
Under the earlier presentation, acquisition-related restricted cash was treated outside that combined balance, so a change in it affected the cash-flow line differently. After adoption, restricted cash was included with cash and cash equivalents, changing how the movement was reflected in the statement. The answer supports its explanation with disclosures from Tesla’s 2016, 2017, and 2018 filings. It addresses presentation and reconciliation, not the underlying economics of the acquisition, and offers no independent recalculation of the reported amounts.
Key ideas
- Tesla retrospectively adopted a rule requiring restricted cash to be included in cash-flow reconciliations.
- Including restricted cash with cash and cash equivalents changes how balance movements appear in cash-flow reporting.
- The 2018 comparative presentation can therefore differ from the original 2016 filing.
- The explanation relies on Tesla’s disclosures across its 2016, 2017, and 2018 filings.
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Full text
# Tesla Inc. Cash Flow Statement # Tesla Inc. Cash Flow Statement Could someone with US GAAP accounting background explain to me the difference between 2018 10-K and 2016 10-K form concerning 'Business combinations, net of cash acquired' for year 2016. I have been comparing the two reports but cannot understand how both figures were derived. I believe it has something to do with restricted cash as the difference between the two figures equals 129,196. The latter appears in Note 3: Business Combinations. However, I still cannot grasp what the purpose of the line item is, how it is derived and what exactly causes the difference between the two cited reports. I would appreciate if someone experienced could help me. ## Answer by Catalyx (score 1) https://quant.stackexchange.com/a/70638 SUMMARY The difference between Tesla, Inc.'s "Business combinations, net of cash acquired" figures for fiscal years 2016 and 2018 seems a result of the issuer adopting an accounting policy change in fiscal year 2018 and applying it retrospectively. In short, the restricted cash figure as reported in the issuer's 2016 statement of cash flows, which relates to an acquisition, was a net figure that was accounted as a non-cash or -cash equivalent item in the statement of cash flows. Hence, an increase in the item's balance was displayed as a use of cash. Since implementing the accounting rule change, the item is consolidated with cash and cash equivalents thus an increase in its balance is a source of cash. DETAILS As explained in the issuer's 2016 10-K (bold font added for emphasis): > In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). The ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the potential impact of adopting the ASU on our consolidated financial statements. The issuer's 10-K filing for fiscal year 2017 notes : > In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, which requires entities to present the aggregate changes in cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, the statement of cash flows will be required to present restricted cash and restricted cash equivalents as a part of the beginning and ending balances of cash and cash equivalents. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU is retrospective. We will adopt the ASU on January 1, 2018, which will result in restricted cash being combined with unrestricted cash reconciling beginning and ending balances. The issuer's 10-K filing for fiscal year 2018 notes that the accounting rule change was adopted and implemented for reporting the year and retrospectively (bold font added for emphasis): > In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, which requires entities to present the aggregate changes in cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, the statement of cash flows now presents restricted cash and restricted cash equivalents as a part of the beginning and ending balances of cash and cash equivalents. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU is retrospective. We adopted the ASU on January 1, 2018, which resulted in restricted cash being combined with unrestricted cash reconciling beginning and ending balances. Refer to the Restricted Cash section for the reconciliation. REFERENCES Tesla, Inc.'s Form 10-K filings are found here: - Fiscal year 2016 - Fiscal year 2017 - Fiscal year 2018
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