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1 – 10 of over 11000H.Y. Hung, Monica Chan and Annie Yhi
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…
Abstract
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.
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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…
Abstract
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.
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Theo Christopher and Salleh Hassan
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…
Abstract
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…
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Practical implications
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.
Originality/value
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.
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In this article, modifications are suggested for the current format of the cash flow statement, which is prescribed by AC 118, in order to address ambiguities and improve…
Abstract
In this article, modifications are suggested for the current format of the cash flow statement, which is prescribed by AC 118, in order to address ambiguities and improve comparability. This redefinition of activities, together with the alteration of the layout, leads to a better explanation of the cash‐generating function of an enterprise. The authors argue that the separation of the cash flow for the maintenance of the existing resource base and the cash flow for the expansion thereof, is essential information in a model for the prediction of the future cash flow generation of a company. The resultant increase in the accessibility, reliability and utility of cash flow reporting should enhance users’ economic decision making and liberalise financial information. The modifications proposed in the article can therefore assist standard setters to improve financial reporting.
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Mary Fisher, Teresa Gordon, Marla Myers Kraut and David Malone
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…
Abstract
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.
Leo Cheatham and Carole Cheatham
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…
Abstract
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.
Neil Garrod and Fatimah Shahman
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…
Abstract
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.
Salleh Hassan, MS Narasimhan and Theo Christopher
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…
Abstract
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).
Karen Lightstone, Karrilyn Wilcox and Louis Beaubien
– The purpose of this paper is to investigate the accuracy and informational quality of the cash from operations section of the cash flow statement.
Abstract
Purpose
The purpose of this paper is to investigate the accuracy and informational quality of the cash from operations section of the cash flow statement.
Design/methodology/approach
This paper empirically tested the accuracy of the cash from operations reported by Canadian non-financial companies. The authors studied 262 companies at three different time periods providing 786 firm observations. For each observation, the balance sheet was used to confirm the figures reported in the statement of cash flows. In addition, the authors investigated management's disclosure of the particular working capital items.
Findings
The findings suggest that in recent years, companies are more likely to overstate their cash flow from operations, thereby presenting a better financial picture than is supported by the balance sheet accounts. This would suggest that the investing or financing section would be correspondingly understated. The presence of acquisitions reduces overstatements, which may be the result of more auditor presence.
Research limitations/implications
This paper extends previous research from documented single, isolated instances of cash from operations being misstated to include a significant sample with more generalizable findings. The data are Canadian which may limit the generalizability to other countries. Future research should address the extent to which financial analysts rely on the reported cash from operations figure.
Practical implications
This preliminary study may have implications for financial analysts and others relying on the free cash flow figure.
Originality/value
This study expands on previous research which has taken place only on a case-by-case basis.
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