The cash flow statement: implications for the use of the direct or the indirect method

摘要

Purpose - To describe a user-oriented, pedagogical approach that integrates the statement of cash flows throughout the financial accounting course. It also reviews the major regulatory requirements on cash flow reporting amended by IAS No. 7. Design/methodology/approach - The essence of this approach is the use of an expanded accounting equation with temporary cash accounts corresponding to major categories on the statement of cash flows. Findings - Provides information about the use of cash flows. Recognises that the timing of statement of cash flows coverage in accounting courses is unfortunate for two reasons. First, the statement of cash flows is an important topic that all business students need to understand. Second, most students learn cash flows at the beginning of their financial accounting class, so there is no reason to defer coverage in this topic. Practical implications - This paper provides a useful source of information for undergraduate and graduate students to understand and evaluate the links between cash flow statement and other financial statements. Originality/value - This paper fulfils a gap in educational research by helping students to develop their skills and their critical view on the theory and usefulness of the cash flow statement.