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Cash Flow Statements: Preparing and Reconciling, Defining Cash, Direct vs. Indirect Methods, Classifying Transactions

Recording of a 110-minute CPE video webinar with Q&A

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Conducted on Wednesday, November 15, 2023

Recorded event now available

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This webinar will address the preparation of the cash flow statement in accordance with FASB ASC 230 and offer practical advice to expedite its completion and properly report its components. Our panel of accounting professionals will provide comprehensive examples, illustrative cash flow statements and walk you through reconciling the entries on the cash flow statement with other required financial statements.

Description

The cash flow statement may be the most complex and least understood of the primary financial statements. It is wrought with choices and classification issues that practitioners must consider. The first hurdle is defining cash. According to ASC 230, cash includes "not only currency on hand but demand deposits with banks or other financial institutions." Also considered cash are cash equivalents that are: "(a) Readily convertible to known amounts of cash (b) So near their maturity that they present insignificant risk of changes in value because of changes in interest rates." Additionally, cash could be restricted or not and should be reported accordingly.

Once accountants determine what is included as cash, they must decide whether the indirect or direct method is better or required. Then, each cash transaction must be reported within the appropriate section of the statement, either investing, financing, or operating. The classification of an item is not always easily determined, and transactions can appear in more than one section. The purchase of a business, the sale of equipment or property, and theft or casualty losses can be difficult to classify. Perhaps the most troublesome aspect comes after all transactions are classified, and the accountant has a draft of the cash flow statement. The statement itself must reconcile and reconcile with the other financial statements presented.

Listen as our panel of A&A experts guides accounting and auditing professionals through preparing cash flow statements with a particular emphasis on reconciling this intricate statement.

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Outline

  1. Introduction: purpose of cash flow statements
  2. Guidance--FASB ASC 230 Statement of Cash Flows
  3. Methods
    1. Direct
    2. Indirect
  4. Sections of the cash flow statement
  5. Special items
  6. Disclosures
  7. Reconciliation and worksheets
  8. Common errors
  9. Illustrative examples

Benefits

The panel will cover these and other critical issues:

  • Reconciling the entries of the cash flow statement
  • When the direct method should be selected for preparation of the cash flow statement
  • Common errors to avoid when preparing the cash flow statement
  • Reporting special items on the cash flow statement
  • Required cash flow statement disclosures

Faculty

Hampton, Meg
Meg Hampton, CPA, MAcc
Manager
Anglin Reichmann Armstrong

Ms. Hampton is a Manager in the Audit and Assurance Department. She attended the University of Alabama, where she...  |  Read More

Peters, Katina
Katina Peters, CPA, CGMA
Owner
Peters, Johnson, Staley & Co.

Ms. Peters is a business growth and profitability advisor with a passion for helping clients achieve their dreams. She...  |  Read More

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