Does the Formal Structure of the Cash Flow Statement have an Impact on the Understanding of the Data Contained In the Report Explaining the Company and Financial Dynamics?
The financial analysis of a company, implemented through ratios alone, can lead to making completely erroneous judgements about the dynamic development of the company’s income and expenditure. For this reason, cash flows and the statement that summarises them represent essential elements of the study of the company’s financial performance. Various international bodies have addressed this issue since, in most countries, the cash flow statement now identifies one of the elements that make up the financial reporting for the year, on par with the balance sheet and profit and loss. Here we will take a closer look at the central bodies that have addressed this issue and illustrate what has been said about cash flow and the cash flow statement by the American FASB, the IASB, the Italian Civil Code and the Italian Accounting Standards Board. As you will see, all of these bodies propose structures or examples of items requiring the highlighting and re-grouping of needs and sources into three aggregates: operating activities, investing activities and financing activities. Subsequently, we will point out that information limitations characterise these statements. Therefore we will propose drafting a report structured according to the logic of an integrated information system, i.e. a system in which all the documents forming part of financial reporting and management control are consistent at a substantial and formal level and, therefore, at the level of the terminology used.
