Business, Management and Accounting
8 years ago

Financial statement reform needed to prevent overstatement of operating cash flow.

Financial Analysts Journal
Statement of Cash Flows: Time for Change!
O. Whitfield Broome

Paper Summary

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The statement of cash flows needs to change because it's confusing and can lead to errors in financial reporting. The way cash flow from operations is currently presented is unclear and can be misleading. To fix this, using the direct method for reporting cash flow from operations is recommended. Companies also need better guidance on how to classify different cash flows. Overall, the statement of cash flows needs clearer descriptions and simpler language to make it easier for everyone to understand.