The Statement of Cash Flows Turns 30

The Statement of Cash Flows Turns 30

By James Schmutte and James Duncan, PhD, CPA

This past year marked the 30th anniversary of the statement of cash flows as a required financial statement. 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.”

Despite 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. (more…)

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