Problem:
The statement of cash flows provides reconciliatory information between the income statement and the changes in financial position of the firm for a given accounting period. It is also claimed that cash flow information is less noisy since management has less discretion in the recognition timing. Yet, many have criticized the statement of cash flows on the classification issues.
Required:
A. Discuss the pros and cons of the statement of cash flows.
B. Cite research findings regarding the information content of the statement of cash flows.