[Illustrative Checklist] Disclosure Requirements under AS 3 | Cash Flow Statements

AS 3 provides information about the cash flows of an enterprise and is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. The economic decisions that are taken by users require an evaluation of the ability of an enterprise to generate cash and cash equivalents and the timing and certainty of their generation. The Standard deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a cash flow statement which classifies cash flows during the period from operating, investing and financing activities.

As per the requirement of this standard, an entity is required to follow the below-mentioned disclosure requirements:

I. Check whether the entity has disclosed the Cash Flow Statement during the period classified by operating, investing and financing activities in a manner that is most appropriate to the business of the enterprise for each period for which financial statements are presented.

II. Check whether an enterprise has reported cash flows from operating activities using either:

(a) the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed; or

(b) the indirect method, whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

Further, if reported under direct method, whether:

(i) major classes of gross cash receipts from operating activities are disclosed separately.

(ii) major classes of gross cash payments of operating activities are disclosed separately.

And if reported under indirect method, whether net profit or loss is adjusted for the effects of:

(i) transactions of a non-cash nature.

(ii) any deferrals of past operating cash receipts or payments.

(iii) any accruals of future operating cash receipts or payments.

(iv) items of income associated with investing cash flows.

(v) items of income associated with financing cash flows.

(vi) items of expenses associated with investing cash flows.

(vii) items of expenses associated with financing cash flows.

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