The international cash flow accounting standard should be revised to help users of financial statements asses the liquidity, solvency and financial flexibility of companies. This is the conclusion of collaboration between academics and professional accountants on how statements of cash flows could evolve.
The report by academics of the British Accounting and Finance Association’s Financial Accounting and Reporting Special Interest Group (FARSIG) concluded opportunities to improve statements include requiring supplementary disclosures such as a reconciliation of net debt, and exploring how to integrate cash flows and ESG-related information.
Sharon Machado, Head of Sustainable Business, Policy and Insights, ACCA, said: “FARSIG’s work this year raises interesting questions about the relationship between earnings and cash flows, and the impact of social and environmental factors on organisations’ current and future cash flows. Today such factors are rarely explained in cash flow statements or related disclosures. The reporting of sustainability-related financial disclosures may fill this gap through complementary information. The work that FARSIG undertakes explains why ACCA continue to value our relationship so highly.”
