« Drilling into Income Statement Semantic Model | Main | Three Separate Dow Industrials Lists »

Drilling into Cash Flow Statement Semantic Model

Continuing on my journey to discover the high level semantic model of financial statements, I dug a layer deeper into the cash flow statement.

As I pointed out, of 5525 filings, 5304 (96%) reported either the concept us-gaap:CashAndCashEquivalentsPeriodIncreaseDecrease or us-gaap:CashPeriodIncreaseDecrease. Why two different concepts?  Why would different concepts be needed for this fundamental piece of information? Personally, I see no need.  One concept such as "us-gaap:NetCashFlow" or something like that would be sufficient in my book. Another thing which is unclear is why a filer would need to extend that concept. A small number of them do.

Digging deeper, 4933 (89%) had the detailed concepts to arrive at what amounts to Net Cash Flow and the computation of the sum of those detailed concepts agreed with the total. Net Cash Flow is comprised of:

  • Net cash flow from operating activities of continuing operations
  • Net cash flow from financing activities
  • Net cash flow from investing activities
  • Net cash flow from discontinued operations
  • Effect of exchange rate changes

Add these up, the agree to the total for 4933 in my test set. Now, filers can report the discontinuing operations in a couple of different ways but all that is taken into consideration in my computation.

There is something interesting which I would point out. Note the bullet for "Effect of exchange rate change" in the list.

A very small minority of filers, 118 (2%) do not include the "Effect of exchange rate changes" in Net Cash Flow; rather they put it in the roll forward computation: Beginning Cash + Net Cash Flow + Effect of exchange rate changes = Ending Cash.

In querying some accountants about this the bottom line is that there is no specific industry taking this approach and there seems to be no "business reason" or "unique reporting need" to take this approach. It is not illegal to do this per the financial reporting standards, it is certainly not best practice as most people take the approach to include this in Net Cash Flow.  This is an example of an ambiguity in the financial reporting standards.

On to the income statement....

Posted on Thursday, September 15, 2011 at 08:47AM by Registered CommenterCharlie in | CommentsPost a Comment

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
All HTML will be escaped. Hyperlinks will be created for URLs automatically.