Cash flow statement

Published 01 March 2016

Cash flow statement is a vital component of any financial statements.

According to the International Accounting Standard (IAS/IFRS) set, Companies are required to provide a cash flow statement as mandatory component of their financial statements. IAS 7 specifically indicates that "Information about the cash flows of an entity is helpful in providing users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents and the need of the entity to utilize those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an entity to generate cash and cash equivalents and the timing and certainty of their generation".

Such consideration and obligation has finally been adopted by the Italian legislator through the implementation of Leg. Decree n. 139/2015, that in fact makes it mandatory for all Companies (except the ones falling under the limits of "small entities") to present a cash flow statement together with the balance sheet and the profit and loss statement.

Although the Decree does not impose a specific scheme for the presentation of the cash flow statement, accounting standards (both domestic and international) represent a reliable source of information and guidance for the fair and true presentation of cash flow statement.

Further information on the cash flow statement, together with a comparison between IAS/IFRS and ITA GAAPs and a practical example, can be found in my new ebook at the following link: