The first issue in the ‘Investor view’ series highlighted some of the key points raised by members of the Corporate Reporting Users' Forum at the October 2009 ‘Meet the Experts’ conference in London. At the top of the list of reporting areas that investors considered could be improved was the net debt reconciliation.
This edition of ‘Investor view’ provides a high-level overview of the reconciliation and the benefits it can provide to users of the financial statements in their assessment of an entity’s liquidity and solvency.
A net debt reconciliation shows how a company’s indebtedness has changed over a period as a result of cash flows and other non-cash movements. It typically takes the form of a reconciliation to items in the cash flow statement; however, for clarity it should not be incorporated within, or be an extension of, the cash flow statement itself.