USE FASB WEBSITE Answer the following questions by reference to the FASB Codific

Question

USE FASB WEBSITE

Answer the following questions by reference to the FASB Codification Accounting Standards. Include the appropriate citation reference to your response at the beginning of the response.

Question #1       In preparing a consolidated statement of cash flows, is a firm required to disclose cash flow per share?

Question #2       Firms adopting the direct method to prepare the statement of cash flows often include a reconciliation of net income to net cash flows from operating activities. Is this required, and, if so, how should it be presented?

Explanation / Answer

As 1. Under US GAAP, the accounting standard prohibits an entity from reporting cash flow per share in the financial statements.

But under IFRS, entity voluntarily choose to report cash flow per share or not. There is no explicit prohibition.

Ans 2. Yes, under US GAAP according to IAS 7 the companies preparing cash flow statement using direct method should also present a reconciliation of net income to net cash flow from operating activities as supplemental information.

Format of reconciliation :

Net Income

Add: depreciation

Add: loss on sale of fixed assets

Add/less: Inc. Or Dec. In inventory

Add/less: Inc. Or Dec. In receivables

Add/less: Inc. Or Dec. In accounts payable

= Cash flow from operations   

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