Search results

This article assesses the state of cash flow reporting by listed South African industrial companies in order to evaluate whether the users of financial statements can accept them as being reliable and use them as a tool to compare the operating performance of various companies. As the cash flow statement has been in use since 1989, it was envisaged that compliance would be high. However, it was found that there are several companies that deviate from some of the requirements of AC 118 regarding cash flow statements.

Use of cash flow reporting has been in the rise for the past few years to ensure that cash flows are reported in a form that highlights the significant components of cash flow and facilitates comparison of the cash flow performance of different business. Because there are direct and indirect methods of preparing such statements, this paper is to examine the usefulness of the cash flow statements in Hong Kong context using empirical study. It was suggested from the findings that cash flow statements are preferred by a lot of users.

This study examines the perceptions of Malaysian investment analysts on the usefulness of statement of cash flows compared with other sections in the annual report. Namely, the Chairperson's Statement, Director's Report, Profit & Loss Account, Balance Sheet, Auditor's Report, and the Notes to the Financial Statements. The inference of this study, drawn from a mail survey, suggests that investment analysts perceive the statement of cash flows to be as useful as the balance sheet and less useful than the profit and loss account but more useful than the other sections forming the basis of the study. It is read less thoroughly than the balance sheet and profit and loss account and poses greater difficulty in understanding, however, surprisingly, requires less explanation. A comparison with a prior New Zealand study indicates differences between the two studies. Plausible reasons are proffered for these differences.

This paper reports an attempt to design a free cash flow version of the cash flow statement. In specific, the paper relates the comprehensive income concept to the definition of free cash flows and shows how free cash flows and residual income can be calculated from the cash flow statement.

This paper exhibits how this different version of the cash flow statement can be reported by illustrating the differences with the form of the statement required by the regulatory accounting bodies.

This paper shows that the cash flows resulting from operating and investing activities are exactly equal to the cash flows received by debt and equity holders (financing activities) by using a simple definition of a company's free cash flow.

The method used requires a different version of a cash flow statement in which all financing related cash flows, such as interest expense is not included in the cash flow from operating activities. This version of the cash flow statement can be used in order to evaluate and appreciate financial policy formulation.

The paper provides to the shareholders and all the parties who are interested in firm and its operation (managers, lenders etc) with information about the company's ability to distribute dividends, to issue new debt and in general the company's ability to meet its obligations.

The operating activities section of the statement of cash flows presents a long-standing teaching challenge for accounting educators. The direct method is easy to understand yet difficult to prepare; the indirect method is harder to understand but easier to prepare. Many instructors address the two methods separately, requiring students to learn two different ways for preparing the operating section of a statement of cash flows. Because of this focus on the mechanics of preparation, the result is often an emphasis on how to prepare the cash flow statement rather than on the essential information the statement provides. In this paper, the authors note that both direct and indirect methods begin at the same point, that is, the income statement, and end at the same point, that is, cash flow from operations. Then, the authors describe one process by which the income statement and the balance sheet can be analyzed to provide the information required to present operating cash flow using either the direct or the indirect method. Using this approach allows students to apply one intuitive process for computing cash flow from operations rather than memorizing two different sets of rules for direct and indirect methods.

This instructional tool enhances coverage of statement of cash flows topics in graduate or upper division undergraduate accounting and finance courses.

We review one of the complexities of preparing the statement of cash flows. The exercise may include a discussion of the mechanics of preparation of the statement of cash flows using the indirect method. This discussion might include rationales behind operating section adjustments and highlight the pitfalls of using these adjustments without understanding their reasons. Preparation of a statement of cash flows may be followed by introducing the concept of nonarticulation and how it can cause the information presented in the statement to be misleading. To further understanding, the instructor may introduce the reconciliation worksheet provided. Finally, a current public company example, also provided, highlights the magnitude of nonarticulation in practice.

Students learn the complexities related to the preparation of the statement of cash flows. They are introduced to the concept of nonarticulation using an example of public company financial statements. Student feedback suggests appreciation for developing a deeper understanding of the statement of cash flows, learning why they are unable to replicate disclosed operating cash flow from balance sheets of publicly traded companies.

Reporting cash flows is a relatively recent development in college and university financial reporting. An examination of the purported usefulness of cash flow information to the users of college and university financial statements including an examination of the relationship between accrual-based change in net assets and cash provided by operations found private universities have implemented the cash flow reporting requirements with a relatively high level of compliance employing the indirect format for reporting operating cash flows. The principal areas of deficiency were the reporting of split-interest, restricted gift activities and the required disclosures of cash outflows related to interest and taxes. The discussion of the compliance deficiencies and display findings leads to needed disclosure guidance and future research.

Evidence in the literature repeatedly points towards failure to understand cash flow shortages as a major problem of small business operators. Theoretically, they should be able to use financial statements prepared by their accountants as planning and control tools. However, because of accountants' use of the accrual system, rather than cash, and the meticulous detail that tends to make statements too complicated for the untrained user, many operators simply do not attempt to use these statements.

An issue which has received recent attention internationally is that of cash flow statements. In Malaysia members of the accounting bodies have been invited to present their comments and views on the possibility of adopting cash flow statements in Malaysia. Historical links with the United Kingdom mean that extant UK accounting standards usually find their equivalents in Malaysia sooner rather than later. The UK standard on cash flows requires a categorisation of cash flows which is different to the IASC and every other regulatory body except that in Hong Kong. On the other hand, Singapore, which has historically mirrored extant UK regulations quite closely, has decided to adopt the IASC model for cash flows. Thus the debate about whether, and how, to move from funds flow to cash flow reporting in Malaysia is tinged with an additional degree of complexity. By setting out a brief history of the transition from funds flow to cash flow reporting in the rest of the world and providing evidence from observations on the UK standard by preparers of accounts, it is hoped to contribute to the current debate in Malaysia.

This study revisits the issue of the usefulness of the Statement of Cash Flows (SCF) by examining the perceptions of mutual fund investment analysts in India on the relative usefulness of the Income Statement, Balance Sheet, Notes to the financial statements and reports of Chairperson, Directors, and Auditors. Six testable hypotheses were developed and tested. The evidence of this study, drawn from a mail survey that achieved a high response rate, suggests that the SCF is read significantly less thoroughly, poses greater difficulty in understanding, and is perceived to be less useful than any of the other components of annual reports. The results of the study are also compared against those reported in similar studies undertaken in New Zealand and Malaysia, which show significant differences. A possible explanation for the contrasting results of the current survey is that Indian regulation allows only for an indirect format for presenting the statement of cash flows. The results of the survey suggests a pressing need for the Indian regulators to modify the format of reporting the SCF or give an option to companies accorded under IAS ‐7 (revised).