Cash Flow Statements and Their Formats Flashcards
Two Types of Cash
Operating Cash and Long Term Cash Flow
Operating Cash - Cash Cycle
Operating cycle cash moves from inventory to receivables to cash.. The operating cycle cash releases cash temporarily and does not depend on any injection of new cash.
Long Term Cash Flow - Cash Flow Cash
Comes from profits the permanent improvement in asset efficiently the sale of non-current assets, or additional investments.
Two Cash Flow Statement a Company May Elect to include in Financial Statements
SFAS 95 Direct and SFAS 95 Indirect
SFAS 95 Direct
Starts at the top of the Income Statement with Sales and recast accrual expenses to cash outlays to arrive at cash profit.
Includes Supplemental disclosures of operating cash flow.
UCA Direct
Not Allowable by GAAP
Improves Direct Methods usefullness in assessing debt service ability.
Indetifies interest expense and CPLTD as separate cash flow requirements after it calculates Cash Flow from Operations
SFAS 95 Indirect Statement
Starts at the bottom of income statements and adjusts to reconcile with changes in cash. Focuses on differences between net profit and net cash flow fro operations. Is required by GAAP as it contains supplemental disclslure of operating cash flow. Provides supplemental information that support repayment including interest payments, can payments for income taxes, non-cash financing for investing transactions
Compare UCA Direct and SFAS Direct
Length
UCA includes more details
SFAS relies on disclosure that reconcile net income to net operating cash flow.
Dscilosure provided in supplemental
Compare UCA Direct and SFAS Direct - Interest and Taxes
UCA - Changes in Non-current Liabilities are segregated as miscellaneous cash outlays
Includes Miscellaeous Outlay with Cash Taxes paid in a separate section within Operating Cash flow.
Provides a segrated section to measure financing costs, including dividends, before arriving at net cash income.
SFAS-Includes Interest and cash taxes in operating cash flow.
Compare UCA Direct and SFAS Direct - Loan Principal Payments
UCA - discloses long-term debt repaid in cash after amortization, which follows Net cash income.
SFAS - Consolidates financing activities into one section, Net Cash Provided by Financing Activities.
Compare UCA Direct and SFAS Direct - Loan Payment Priority
UCA Cash flow Islolates operating cash flow before considering capital expenditures. giive CPLTD a priority before capital expenditures
SFAS - Measures all changes in debt and equity at one time, including current and long term portions of the the company’s loans.
SFAS accounts for Capital Expenditures before debt, making it harder to verify the company paid debt before capital expenditures.
Compare UCA Direct and SFAS Direct - Similarities
Compensate for disadvantages of accural accounting.
Separate the cash flow from operating, investing, and financing activities
Separates internal from external sources and uses of cash flow
Reconciles the net result of operating and investing cash to the net change in the cash.
Compare UCA Direct t SFAS Indirect Cash Flow Statements - Adjusting for Depreciation and Amortization
SFAS adds back depreciation and amortization expense as cash
UCA removes noncash expense by showing them as sources of cash.
Compare UCA Direct SFAS Indirect Cash Flow Statements - Balance Sheet Accounts
Both statements measure cash impact of changes in balance sheet items. On the SFAS statemetns Balance sheet items are under Reconciling Items.
The UCA captures receivable as an adjustment to accrual basis revenue.
Compare UCA Direct SFAS Indirect Cash Flow Statements - Accounting for Income
SFAS starts with net income, so there is no need show individucal income and expensee accounts.
UCA statements included relavent income statement accounts
Compare UCA Direct SFAS Measuring Year to Year Changes In Receivables
SFAS measures the change in net AR by combining Gross Receivables and Allowance for Bad Debt
Combines Gross Receivable and Allowance for Bad Debt in one account, Change In AR