Research
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.
Financial Reporting Destined to External Third Parties as a Tool for Analysing Creditworthiness: Usefulness and Limitations. The Italian Case
Financial reporting to external third parties is the primary document based on which, at least in theory, a company's creditworthiness should be assessed. Income, capital, financial and sustainability performance should be understood through a thorough analysis of the financial reporting and sustainability report data. Here, we will focus exclusively on Financial reporting. As we will see, Financial reporting intended for the outside world is characterised by an information gap that tends to preserve the company's right to information and privacy.
Income Components in the Italian and International Experience: From the Contraposition between Ordinary and Extraordinary Costs and Revenues to the Contraposition
The costs and revenues recognised in the profit and loss for users outside the company have evolved in various countries and at the level of international accounting standards concerning the juxtaposition of large aggregates of negative and positive income components. Over time, there was talk of costs and revenues without any contraposition whatsoever, even going so far as to state that a profit and loss was perfectly valid with three items recorded in such a document: total costs, total revenues, profit or loss for the year. Over time, this situation has completely changed both in Italy and internationally. In the 1990s, the profit and loss governed by the international IAS and the profit and loss governed by Italian civil law presupposed the contraposition of extraordinary costs and revenues. After this contraposition had been eliminated at the international level, discussions began in Italy about whether the contraposition between extraordinary and ordinary income components could be replaced with another contraposition using the term 'extraneousness' or 'not extraneousness' to the company's activity. After this evolution, at present, both at the international level and at the Italian national level of all countries that refer to IAS/IFRS as elements that should be, in the medium to long term, introduced in all national legislations at least in Europe and, there is no longer any contraposition between negative and positive income components therefore, according to the contrapositions with the above all income components are ordinary, and all income components are not extraneous to the business.
