Abstract
As the statement of cash flows fulfils a critical role in assessing an entity’s liquidity, cash generation, and overall financial health, its effectiveness as a decision useful tool has come under scrutiny in recent years. In response to the IASB’s research project, Statement of Cash Flows and Related Matters, this study evaluated a number of these perceived concerns and deficiencies to assess whether they impact the usefulness and clarity of financial reporting and the potential need for improvements (if any) to enhance financial reporting effectiveness and decision usefulness. The purpose of this study is to evaluate the perceived concerns and deficiencies in the IFRS Accounting Standard, IAS 7 Statement of Cash Flows, based on increasing stakeholder concerns and the IASB’s recent efforts to prioritise these concerns
The study followed a qualitative, interpretive approach through semi-structured interviews. The semi-structured interviews solicited the perceptions of eight knowledgeable and experienced accounting professionals in financial reporting who are part of the SAICA Accounting Practices Committee and/or its sub-committees. The research participants have various backgrounds with diverse experience in the profession, including academics, auditors, regulators, IFRS consultants, IFRS committee members and preparers of financial statements.
Thematic analysis of the data obtained during the interview process confirmed the importance of cash flow information. Furthermore, the thematic analysis revealed recurring concerns about the current guidance contained in IAS 7 Statement of Cash Flows, and participants shared their views on areas of improvement. On the contrary, the thematic analysis also identified that some items were not perceived as concerns by the research participants, who expressed satisfaction with these items. Participants indicated that some of these perceived concerns may stem from poor financial reporting practices by the preparer.
These findings contribute to the broader discourse on improving financial reporting and provide timely input as the IASB considers whether to reform IAS 7 Statement of Cash Flows or pursue targeted improvements.