Which statement best describes where capital contributions from developers should be reported in an enterprise fund's cash flows?

• A. Included in financing activities
• B. Included in investing activities
• C. Included in noncapital financing activities
• D. Included in capital and related financing activities

Answer: (D)

Capital contributions from developers are resources provided specifically to fund the construction or acquisition of capital assets. In an enterprise fund’s cash flow statement, these inflows are categorized with other financing activities that relate directly to capital assets, i.e., capital and related financing activities. They are not operating cash flows, since they do not arise from the ongoing provision of services, nor are they investing activities, since they don’t involve the purchase or sale of investments. They also aren’t noncapital financing activities, which cover financing sources not tied to capital asset formation. Reporting the contribution under capital and related financing activities best reflects its purpose of financing the enterprise fund’s capital assets.