EFRAG publishes Discussion Paper „The Statement of Cash Flows – Objectives, Usages and Issues“

On November 22nd 2024, EFRAG published its Discussion Paper ‘The Statement of Cash Flows – Objectives, Usages and Issues’. The objective of the discussion paper is to identify and address the perceived issues with the statement of cash flows prepared in accordance with IAS 7, thereby contributing to the IASB research project ‘Statement of Cash Flows and Related Matters’.

The discussion paper states that the issues associated with the cash flow statement are largely dependent on its intended use and the objectives it is designed to achieve. Therefore, the objectives of the cash flow statement are first derived from the Conceptual Framework for Financial Reporting and IAS 7, before examining the extent to which the cash flow statement contributes to achieving these objectives. The cash flow statement issues identified by EFRAG initially relate to non-financial entities:

• Definitions of ‘cash’ and ‘cash equivalents’

• Cash flows of an agent

• Non-cash transactions

• Classification of cash flows

• Disclosure requirements

• Disaggregation of information

• Definitions of measures

• Cohesiveness with other primary financial statements

• Presentation of cash flows from operating activities

As part of describing these issues, it is considered which of the objectives of the statement of cash flows are affected by the issues and whether addressing the issues could potentially have consequences for the statement of cash flows’ ability to meet other of the objectives listed in the discussion paper. In addition, potential alternatives to the cash flow statement, such as a statement of changes in net debt, are proposed for consideration as either a supplement to or a replacement for the cash flow statement.

A separate chapter assesses the relevance of cash flow statements produced by banks and insurance companies, while also exploring potential alternatives to the cash flow statement.

Finally, the discussion paper considers whether the identified issues require targeted improvements or a comprehensive review of IAS 7.

EFRAG invites contributions to the discussion paper, to be submitted by May 15th 2025.