During the 1980s, both financial statement users and preparers expressed dissatisfaction with this reporting basis and the diversity in practice for different definitions of funds, cash, and cash flow from operations, as well as different forms of presentation in the statement (SFAS 95, Appendix A: Background Information). Prior to SFAS 95, the statement of changes in financial position, which focused most often on working capital, was required by Accounting Principles Board Opinion 19. This article highlights practice issues with the statement of cash flows in terms of common reporting deficiencies, recent updates issued by the FASB, and potential changes coming in the future. Houston, and Zhongxia Ye, “Accounting Restatements Arising From PCAOB Inspections of Small Audit Firms,” The CPA Journal, September 2010, PCAOB, “Information about 2015 Inspections,” Staff Inspection Brief, October 2015, Ernst & Young, SEC Comments and Trends,September 2017). Similar cash flow reporting deficiencies have been noted in public company reporting, as evidenced by PCAOB inspection findings, restatements, and SEC comment letters (Dana R. FASB’s efforts in developing the then-new standard were heavily influenced by the objectives and concepts set forth in Statement of Financial Accounting Concepts (SFAC) 1, Objectives of Financial Reporting by Business Enterprises, and SFAC 5, Recognition and Measurement in Financial Statements of Business Enterprises. Statement of Financial Accounting Standards (SFAS) 95, Statement of Cash Flows, intended to overcome the questioned usefulness of the previously required statement of changes in financial position and the inconsistences in preparers’ definition of “funds.” SFAS 95, as amended, is now incorporated in Accounting Standards Codification (ASC) Topic 230, “Statement of Cash Flows.”ĭespite its long history, the cash flow statement continues to present reporting challenges, as evidenced by recurring findings reported by the AICPA’s peer review program and inconsistencies in reporting various cash flows. CASH OUTFLOWS: DIVIDEND PAYMENTS/ COUPON PAYMENTS/ INTEREST PAYMENTS.This past year marked the 30th anniversary of the statement of cash flows as a required financial statement. CASHFLOWS FROM FINANCING ACTIVITIES (FUND RAISING ACTIVITIES) CASH INFLOWS: EQUITY ISSUE/ BONDS ISSUE/ BANK BORROWING. CASHFLOWS FROM INVESTING ACTIVITIES CASH INFLOWS: CASH OUTFLOWS: 3. CASHFLOWS FROM OPERATING ACTIVITIES CASH INFLOWS: CASH RECEIVED FROM CUSTOMERS CASH OUTFLOWS: CASH PAID TO SUPPLIERS, CASH PAID TO EMPLOYEES.

RENT – CASH PAID FOR SUNDRY EXPENSE – CASH PAID FOR INTEREST EXPENSE

= CASH RECEIVED FROM CUSTOMERS – CASH PAID TO SUPPLIERS – CASH PAID TO EMPLOYEES – CASH PAID FOR = COGS + INCREASE in INVENTORY/ - DECREASE in INVENTORY + DECREASE in A/P/ - INCREASE in A/PĬASH PAID TO EMPLOYEES = SALARY EXPENSE + DECREASE in S/P/ - INCREASE in S/P STATEMENT OF CASHFLOWS CASH RECEIVED FROM CUSTOMERS (CASH INFLOWS) = BEGINNING A/R + SALES REVENUE – ENDING A/R = (1,020,000 + 15,678,000) – 1,100, = 15,598, CASH RECEIVED FROM CUSTOMERS (CASH INFLOWS) = SALES REVENUE – INCREASE IN A/R/ + DECREASE IN A/R = 15,678,000 – (1,100,000 – 1,020,000) = 15,678,000 – 80, = 15,598, EX: Beginning A/R =1,020, IF Ending A/R = 900, CASH RECEIVED FROM CUSTOMERS = SALES REVENUE + DECREASE IN A/R = 15,678,000 + 120,000 = 15,798, CASH PAID TO SUPPLIERS (CASH OUTFLOWS) TGDĐ BEGINNING INVENTORY = 100 IPHONES COGS = 1,000 IPHONES ENDING INVENTORY = 70 IPHONES  PURCHASE =? = (COGS + ENDING INVENTORY) – BEGINNING INVENTORY = (1,000 + 70) – 100 = 970 IPHONES PURCHASES = COGS + ENDING INVENTORY – BEGINNING INVENTORY PURCHASES = COGS + INCREASE IN INVENTORY/ - DECREASE IN INVENTORY = 1,000 – 30 = 970 IPHONES PURCHASES (ELE) = 13,678,000 + 60,000 = 13,738, 13,738,000 – 80,000 = 13,658,ĬASH PAID TO SUPPLIERS = PURCHASES + DECREASE in A/P/ - INCREASE in A/P

Cashflows or cash flows