Session 4

1. Statement of Cash Flows Session 4 Intermediate Accounting I - Fall 2012

2. Businesses are like Fruit Trees Fruit = Operating Activities Trunk & Branches = Investing Activities Roots = Financing Activities Intermediate Accounting I - Fall 2012

3. Statement of Cash Flows • FASB 95—1987 (ASC 230-10-45) • Components • Operating cash: Operations and working capital • Investing cash: Non-current assets and investments • Financing cash: L/T debt, equity and dividends • Reconciliation of net inc. to ops. cash • Disclosure of non-cash invest. & financing transactions Intermediate Accounting I - Fall 2012

4. Net Income vs. Cash FlowIndirect Method • Net Income • +/- Non-cash Items • +/- Changes in Operating Working Capital • = Cash Flow from Operations • Disclosure of interest and tax payments Intermediate Accounting I - Fall 2012

5. Indirect vs. Direct Method • FASB prefers the direct method • FASB requires net income to cash from operations reconciliation • Components: • Cash from customers • Cash from dividends • Cash from interest income • Other operating cash receipts • Cash paid to suppliers • Cash paid to employees • Cash paid for taxes • Cash paid for interest • Other operating cash payments Intermediate Accounting I - Fall 2012