Wiley GAAP 2013: Interpretation and Application of Generally Accepted Accounting Principles

CHAPTER 4

STATEMENT OF CASH FLOWS

Perspective and Issues

Definitions of Terms

Concepts, Rules, and Examples

Cash Focus

Classification of Cash Receipts and Disbursements

Operating Activities Presentation

Direct vs. indirect

Other Requirements

Gross vs. net basis

Extraordinary items and discontinued operations

Cash flow per share

Entities Exempt from Providing a Statement of Cash Flows

Net Reporting by Financial Institutions

Not-for-Profit Organizations

Reporting Hedging Transactions

Reporting Foreign Currency Cash Flows

Preparation of the Statement

Statement of Cash Flows for Consolidated Entities

PERSPECTIVE AND ISSUES

Accounting Standards Codification (ASC) 230, Statement of Cash Flows, establishes standards for cash flow reporting. A statement of cash flows is a required part of a complete set of financial statements for business enterprises and not-for-profit organizations. Only defined benefit plans, certain other employee benefit plans, and highly liquid investment companies that meet specified conditions are not required to present the statement.

The primary purpose of the statement of cash flows is to provide information about cash receipts and cash payments of an entity during a period. A secondary purpose is to provide information about the entity’s investing and financing activities during the period.

Specifically, the statement of cash flows helps investors and creditors assess

1. Ability to generate future positive cash flows

2. Ability to meet obligations and pay ...