Practice shows that today many companies are experiencing some difficulties in the preparation of the report, reflecting cash flows.These difficulties are often due to differences in the rules for the preparation of a report on international and Russian standards.International standards also provide a relative freedom of the companies on the level of disclosure and the choice of methods and accounting procedures.
In compiling the report, reflecting cash flows may be used indirectly or direct method.For example, financing and investing activities is applicable only direct way.It is considered more informative both from the interpretation of the report, and on the part of its application in the analysis of the financial condition of the organization.In drawing up the report using this method requires a detailed assessment of cash flows due to the fact that the direct way is very time-consuming.Application of this technique is most effective and appropriate under automation.
indirect method is used in the formation of the consolidated financial statements.This format is required for placing on the Stock Exchange for public reporting.It should be noted that this method is less clearly reflects the movement of funds.According to it is quite difficult to "roll out" a figure to transactions on the financial direction.And it is often required for budgeting and internal controls.
Some companies engage in drawing up the two reports, reflecting cash flows.One is made by means of indirect and the other using the direct method.In this same report is used for testing of the second.As a result, the final articles reflect the cash flows are identical in them.This integrated approach helps to ensure the company's management and user accountability all the necessary information to make decisions.However, the use of two ways at once, and requires much labor.
should be noted that regardless of the method used, the report shows the sources of financing of the enterprise, as well as the direction of their target application.Accountability is important in the financial analysis of the company as it is possible to determine its ability to generate income from core operations.The document shows a portion of revenue, which falls on the enterprise in the form of cash.This is important in an environment where accounts receivable to a certain extent covered in offsetting requirements or there is a substantial "isolation" of transfers to customers for services from the period of the provision of these services.The latter, for example, often important for construction companies.
report also allows you to determine the effectiveness of management decisions in the financial sphere.The adoption of each such decision affects the cash flow of the company.For example, there can be a reduction or increase in costs, a change in the direction of finance and other.
adoption of long-term management decisions and planning assumes cash flows.Information about the direction of finance but not information on costs and revenues is the main criterion that allows to implement certain investment projects.In calculating those taken into consideration the analysis of future cash movements and their discounting.This information was incorporated in the report on ways of finance.
In addition, information on cash flow, analysts often apply when determining the free movement of finance, which is one of the most important indicators used in the formation of the company's value.
