Review article
Improvements of the cash-flow statement control function in financial reporting
Metka Duhovnik
; University of Ljubljana, Faculty of Economics, Ljubljana, Slovenia
Abstract
On the basis of deductive considerations applying professional judgement, the article focuses on the additional value of accounting information that can be given to the users of fi nancial statements by a properly prepared statement of cash fl ows. It is based on the fi nding that the professional literature is inconsistent in distinguishing liquidity and profi tability information, and consequently also in distinguishing between the ratios calculated on that basis. It therefore stimulates an improvement in the quality of accounting information with a direct statement of cash fl ows, based on tracing instead of calculating the actual cash fl ow. On the basis of fi nancial statements, including a direct statement of cash fl ows, the ratio analysis of fi nancial statements should be approached from both aspects of profi tability and cash return. The cash fl ow ratios would serve as a control mechanism over the assumptions used when preparing the balance sheet and income statement within the chosen financial reporting framework.
Keywords
Accounting information, financial reporting framework; direct statement of cash flows; cash flow ratios; control mechanism
Hrčak ID:
24489
URI
Publication date:
19.6.2008.
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