The Financial Accounting Standards Board (FASB), in cooperation with the International Accounting Standards Board (IASB), has issued a discussion paper “Preliminary Views on Financial Statement Presentation” proposing a new format for financial statements October 2008. Based on this proposal, there will be major changes for the presentation of all three of the major statements: Statement of Net Income (SNI), Statement of Financial Position (SFP), and the Statement of Cash Flow (SCF). The proposed SCF follows the current format of SFAS No. 95 in presenting cash flows in three sections: operating, investing, and financing. However, there is one major change that will affect the teaching of the SCF in accounting, and that is the requirement for presenting the direct method of presenting cash from operations.

The authors will present an alternative version of teaching the direct method for the Cash Flow Statement that will hopefully enhance the understanding of students.

This article is from the Accounting Instructors’ Report, an electronic journal that provides teaching tips and insights to those who teach accounting and other business courses.

George Romeo, Ph.D., Rowan University
Da-Hsien Bao, Ph.D., Rowan University

Read A Simplification and Visualization of Teaching the Direct Method for Computing Cash from Operations.