In
October 2008, the IASB published a Discussion Paper entitled "Preliminary
Views on Financial Statement Presentation" (see www.iasb.org). Since then,
there have been various meetings to discuss the comments received and proposed
changes. This discussion paper made various proposals about changes to the
statement of cash flows.
Instructions
Locate
and read the Discussion Paper entitled "Preliminary Views on Financial
Statement Presentation" and any Financial Statement Presentation project
summaries and updates on the IASB website that relate to the statement of cash
flows. Write a short report that you can present to your class on the decisions
that have been made to date on this project that will affect the statement of
cash flows and why. Describe how the statement will be different from what is
now reported and any reconciliations that are proposed.
The
Discussion Paper proposes that the statement of financial position, statement
of comprehensive income and statement of cash flows should have similar
categories as outlined below.
|
Statement of Financial Position
|
Statement of Comprehensive Income
|
Statement of Cash Flows
|
|
Business
Operating assets
and liabilities
Investing assets
and liabilities
|
Business
Operating income
and expenses
Investment income
and expenses
|
Business
Operating cash
flows
Investment cash
flows
|
|
Financing
Financing assets
Financing
liabilities
|
Financing
Financing asset income
Financing liability expenses
|
Financing
Financing asset cash flows
Financing liability cash flows
|
|
Income Taxes
|
Income Taxes on continuing operations (business
and financing
|
Income Taxes
|
|
Discontinued operations
|
Discontinued operations, net of tax
|
Discontinued operations
|
|
|
Other Comprehensive Income, net of tax
|
|
|
Equity
|
|
Equity
|
This consistency across all the statements
will assist users in providing a clearer picture across the statements and a
more cohesive picture of the organization’s activities.
The Statement of Cash Flows
The
following is a list of the changes and format proposed for the statement of
cash flows:
·
The direct method will be used (no longer is there a
choice to use the indirect approach).
The reasons for deciding that this method was the best were: to improve user understandability; to provide
better predictive value; to increase transparency; and to enable users to see
trends that were not clear under the indirect method.
·
The classification is still be operating, investing
and financing, but is based on the classification that was used for the related
assets and liabilities on the statement of financial position.
·
The statement of cash flow reconciles the beginning
and ending balance of cash (and not cash and cash equivalents).
·
Cash receipts and payments are to be disaggregated
within each section to provide information for users. Cash flows are to be disaggregated based on
the purchase or sale of assets based on their nature, and the issuance or
settlement of liabilities, based on their nature.
·
In a later Staff paper, dated February 12, 2010, the
Board decided that the cash flow line items did not have to line up exactly
with the line items on the statement of comprehensive income.
Reconciliation of the Statement of Cash Flows to the
Statement of Comprehensive Income
An entity would present a schedule that reconciles the
line items on the statement of cash flows to the line items on the statement of
comprehensive income. That schedule would include the line-item captions for
each of those statements and disaggregate the differences in amounts into
components that have different predictive values, as explained below. As
illustrated on pages 138 and 139 of the Discussion
Paper, the resulting schedule would be a multi-column reconciliation.
This schedule is to disaggregate the comprehensive
income into the following components:
·
Cash received or paid ( excluding cash transactions
with owners);
·
Accruals and systematic allocations such as
depreciation;
·
Recurring changes in fair value or other recurring
valuation changes;
·
Other - which might include non-recurring valuation
adjustments.
·
