Flow Inc. Insurance Settlement Proceeds Are Treated Essay

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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.

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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….....

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