Perspective and Issues

Concepts, Rules, and Examples

Classification of the Statement of Cash Flows

Definition of Cash and Cash Equivalents

Operating Activities Presentation

Direct method presentation

Indirect method presentation

Reporting extraordinary items and discontinued operations

Reporting agency transactions

Other adjustments to arrive at net cash flows from operating activities

Cash Flows from Investing Activities

Discussing Gross and Net Cash Flows

Purchases of long-term assets

Sales of long-term assets



Investments that are not cash equivalents

Interest and dividend income

Notes and loans receivable

Purchase or sale of a subsidiary

Cash Flows from Financing Activities

Restricted contributions and investment income

Short-term and long-term debt

Noncash Investing and Financing Activities

Gifts of long-lived assets

Issuance of social or country club membership shares

Disclosure Requirements


The FASB's conceptual framework project, in particular Statement of Financial Accounting Concepts 1, states that “Financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.” Since the ultimate objective of investment and credit decisions is the maximization of net cash inflows, information for assessing the amounts, timing, and uncertainty of prospective organization cash flows is needed. ...

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