Cash flow statement
Theory:
- Depending on the nature of the cash flows, they are classified as originating from financing or investing activities while the difference between changes in cash and cash flows from both activities is classified as operating flows
- The IAS require that in case of material differences between changes in balance sheet items (e.g. short-term liabilities) and changes in the same items disclosed in the cash flow statement, the reasons need to be clarified in the notes to the financial statements
Practice - examples of errors
- a small non-clarified difference in the total cash flow statements that results from major errors "both ways" in specific cash flows (e.g. GBP 1 of a difference in total flows is an error of GBP 1,000,001 in plus in operating activities and GBP 1,000,000 in minus in investing activities)
- a problem with allocating non-routine events to the appropriate flow group no clarification for major items in the cash flow statement that are not directly due from changes in the balance sheet
