Abstract
The Cash Flow Statement (CFS) had been in use in South Africa since October 1988. It replaced the Statement of Sources and Application of Funds, which had been in use since 1973. In spite of the general acceptance of the benefits of the CFS and its superiority over the Statement of Sources and Application of Funds, there are certain inherent problems. These problems mainly relate to the format of the CFS and its ability to assist in forecasting the survival prospects of an enterprise. In this article the focus is firstly on the format of the CFS and it is compared with the requirement of other guidelines. A revised format is proposed. It also considers the usefulness of the CFS as a management tool in financial decision making. Areas of financial decision making which are considered, are financing, capital investment, dividend and pricing decisions. The final conclusion is that although the CFS could be standardized to a large extent, the same does not apply to the calculation of cash flows for financial decision making in different areas.
Highlights
The Cash Flow Statement (CFS) has been in use in South Africa since October 1988
An additional section is proposed to emphasi1..e the difference between capital and financial investments
Capital investments carry a higher priority for an industrial enterprise than financial investments
Summary
The Cash Flow Statement (CFS) has been in use in South Africa since October 1988. It replaced the Statement of Sources and Application of Funds (SSAF) which had been in use since 1973 as a statutory requirement of the 4th Schedule of the Companies Act, No 61 of 1973. In research it was pointed out that the income of guideline 4.003 {later replaced by Guideline AC201) showed a 100% correlation with cash flow in the absence of real growth (Hamman, 1979: 181-184) This supplementary statement (optional) never received proper acknowledgement Guideline ACl 18 on cash flow information stated, that the cash flow information required by the CFS would provide the specified information. The objectives of this article are twofold: Firstly, it will focus on the format of the CFS as described in ACl 18, and be compared with the requirements of other guidelines This analysis will address the statutory part of the topic. This will prove the wide divergence between cash concepts and that the definition varies according to specific circumstances and occasions
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
