Cash flow disclosure: is there enough?

Why is cash flow important?

Reported profit is important to investors, but so is cash flow. What enables an entity to survive is the tangible resource of cash – not profit, which is merely one indicator of financial performance. Historical cash flows are not necessarily a good indicator of future cash flows, but trend data often provides a base for assessing future cash flow performance and liquidity.

How can disclosures be improved?

Disclosure requirements for cash flow information are primarily governed by IAS 7, ‘Statement of cash flows’. The standard seeks to require disclosure of information that provides investors with a basis for assessing an entity’s ability to generate cash and its needs to utilise that cash. Nevertheless, investors have cited a number of areas in which disclosure could be improved.