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CORPORATE FINANCIAL REPORTING

23 – The Cash Flow Statement. CORPORATE FINANCIAL REPORTING. THE CASH FLOW STATEMENT (FAS 95 or ASC 230). Operating activities xxxx Investing activities xxxx Financing activities xxxx Increase/decrease in cash xxxx Cash, beginning of year xxx

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CORPORATE FINANCIAL REPORTING

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  1. Dilutive Securities and EPS 23 – The Cash Flow Statement CORPORATE FINANCIAL REPORTING

  2. THE CASH FLOW STATEMENT(FAS 95 or ASC 230) Operating activities xxxx Investing activities xxxx Financing activities xxxx Increase/decrease in cash xxxx Cash, beginning of year xxx Cash, end of the year xxxx

  3. THE CASH FLOW STATEMENTPurpose of the CFS: To provide information about a company’s cash receipts and cash payments during a period - organized in a rational manner.

  4. THE CASH FLOW STATEMENT Operating activities ◊ normal day-to-day income producing activities (including buying/selling Trading Securities) Investing activities ◊ acquiring/disposing of non-current assets (including buying/selling Securities Available For Sale) & ◊ lending and being repaid the principal amount loaned Financing activities ◊ borrowing and repaying the principal amount borrowed & ◊all cash transactions with shareholders

  5. THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 20132012 Land 10,000 4,000 and under LIABILITIES there were no liabilities for a land purchase.

  6. THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 20132012 Land 10,000 4,000 and under LIABILITIES there was: 20132012 Mortgage payable for land 5,000 -0-

  7. THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 20132012 Land 10,000 24,000 And on the 2013 financial statements there was no mention of a land impairment loss.

  8. THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 20132012 Land 10,000 24,000 Nothing about a receivable from sale of land. And on the 2013 income statement you saw Gain on land sale 5,000

  9. THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 20132012 Land 10,000 24,000 Mortgage receivable-land 8,000 0 And on the 2013 income statement you saw Gain on land sale 5,000

  10. THE CASH FLOW STATEMENT Suppose you saw the following under ASSETS on a company’s balance sheet: (in $ 000) 20132012 Land 10,000 24,000 And on the 2013 income statement you saw Land impairment loss 14,000

  11. THE CASH FLOW STATEMENT Suppose you saw the following under OWNERS’ EQUITY on a company’s balance sheet: (in $ 000) 20132012 Capital stock 10,000 7,000 Additional paid in capital 14,000 9,000

  12. THE CASH FLOW STATEMENT For the most part, that is the approach companies take to prepare the Investing Activities and the Financial Activities parts of their cash flow statements - they compare balances on the balance sheet.

  13. THE CASH FLOW STATEMENT But for Operating Activities, which is based, in part, on the income statement, companies have a choice: the direct method or the indirect method, both give you the same answer, using different approaches.

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