Assessing the Impact on Cash Flows from Operating Activities – FASB’s Proposed Accounting Standards Update

• In Event: More Financial Reporting

Abstract

Working under their goals of improving the understandability and usefulness of financial statements, the Financial Accounting Standards Board (FASB) issued the recent exposure draft, Proposed Accounting Standards Update (2015). A focus of this exposure draft was to change the presentation of financial statements for not-for-profit entities as required in the Statement of Financial Accounting Standards No. 117. Among other things, this proposal dealt with the Statement of Cash Flows. Along with requiring only the direct method of reporting cash flows from operating activities, the FASB proposal required a change in classification of certain items within this statement. Our research extended FASB’s proposed changes in classification of the Statement of Cash Flows to for-profit companies. Specifically, we examined the change in classification of purchases and sales of long-lived assets from investing to operating activities and its impact on cash flows from operating activities.

Authors

• Roberta J Cable, Pace University

• Patricia Healy, Pace University - Westchester