Cashflow statement improvements targeted by watchdog

IMPROVEMENTS to cashflow statements are being targeted in a consultation launched by the Financial Reporting Council (FRC).

The paper aims to identify possible “evolutionary improvements” to the statement of cashflows as currently required by IAS 7.

Paul George, executive director for corporate governance and reporting at the FRC, said: “The paper suggests several ideas for improving the transparency and consistency of the statement, while providing the company’s own perspective on the management of liquid resources.”

Companies that prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) are required to follow the International Accounting Standard (IAS) 7. The basis of this standard is more than 20 years old, with the FRC highlighting the need for modernisation and improvements.

Some topics that are being addressed include: issues that arise in the context of financial institutions; and the reporting of restricted cash and the reconciliation of net debt.

The FRC’s Financial Reporting Lab has published a number of reports that are relevant to the issues discussed in this paper including; operating and investing cash flows (November 2012), net debt reconciliations (September 2012), and debt terms and maturity tables (November 2012).

George concluded: “The paper and the responses to it will make an important contribution to the IASB’s project on primary financial statements.”

The deadline for responses to the consultation is 28 February 2017.