Statement of Cash Flows

Introduction to Statement of cash flows

Thestatement of cash flows should assist users to assess the capability of a company to produce cash and to assess the need of company for cash. The presentation needs for this statement are set out in IAS 7 Statement of Cash Flows.


The notes play a vital role in helping users to be aware of the financial statements.

They will generally consist of the following information:

  • a statement that the financial statements comply along with appropriate IFRSs;
  • a abstract of the measurement bases used and other important accounting policies applied (for instance, the basis of inventories valuation);
  • supporting information that are relating to items appearing on the statement of statement of comprehensive income, financial position, statement of changes in equity and statement of cash flows; and
  • other significant disclosures like future contractual commitments that have not been recognised and financial risk management objectives and policies.

General points

The standard gives support for three main accounting conventions while preparing the financial statements. These are as follow:

  • the going concern convention;
  • the accruals convention (apart from the statement of cash flows); and
  • the consistency convention.

At last, to enhance the transparency of financial statements, the standard says that:

  • offsetting liabilities against assets, or expenses against income, is not permitted. So it is not acceptable, for instance, to offset a bank overdraft against a positive bank balance (in which a company has both); and
  • material items must be displayed separately.

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