Statement of cash flows: general provisions

The use of financial resources by a company or enterprise reflects a statement of cash flows. It is designed to directly or indirectly display the use of funds during the reporting or other selected period. It shows the receipts with their classification by main articles. This method allows you to compile a generalized picture of economic activity, analyze the sources, structure and magnitude of liquidity and creditworthiness.

This document today acts as a standard in the financial reporting system , which is recognized by the international rules of accounting for cash flow.

Unlike traditional accounting, this type of reporting was widely used only from the second half of the century before last, when information about the movement of financial resources of enterprises and organizations began to be unified on an international scale. For the first time such an approach was applied by Dowlais Ironworks to reflect the reserves of funds for the renewal of the company's fixed assets.

Today, the cash flow statement has become an obligatory document for use by US companies, and since 1994 it has become an international standard under the name of IFRS 7. According to it, the compilation and submission of such a report became mandatory in the list of financial statements of any enterprise or organization.

Today almost all developers of reporting standards claim the high importance of this document. It takes into account the movement of cash flows as a result of core activities, and maintains a net flow account. That is why the cash flow report has become an essential tool for modern management, allowing to show both external and internal revenues and expenses.

In the standard version, the cash flow statement allows you to determine:

- sources and amounts received;

- articles and directions of their use;

- the enterprise's capabilities are guaranteed to ensure that the amount of revenues exceeds the amounts of payments;

- ability to fulfill obligations;

- the critical amount of funds at which the organization or enterprise can continue to conduct business activities;

- the level and amount of equity to invest in the development of the enterprise;

- Sources and causes of differences between profit and expenditure.

Such a report is compiled by any organization or firm, regardless of its industry, ownership, size and structure.

The methodology for the formation of the report in accordance with IFRS has some features that may not take into account the national rules for the preparation of this document. In particular, IFRS itself is based on the principles of accounting, and not on legally defined strict accounting standards. Therefore, the philosophy of the document itself is not to look for violations or loopholes in it, but to try to make the document "working."

As is customary, the documentary registration of the movement of fixed assets divides the influx and outflow of funds by the main types of the enterprise's activities - operational, production, financial. This approach is necessary, first of all, so that interested persons can adequately assess the impact of these areas of work on the overall financial stability of the company.

When compiling a report according to the IAS rules, firms are required to show information about the structure of funds. A wide variety of classifications can be used for identification. For example, in the RF, the cash flow statement (Form 4), although it is one of the main accounting reports, nevertheless has some differences from the rules adopted by the IAS. In the Russian Federation, the report is formed only by direct method, because this form does not provide for the reflection of data on cash equivalents.