Statement of Cash Flows

The statement of cash flows is one of the primary financial statements and forms part of a complete set of general purpose financial statements. Cash generation is a crucial aspect in business because whilst profit is desirable in many companies, unless this profit is cash-backed the company will not survive in the long term. Section 7 of Financial Reporting Standard (FRS) 102 requires the cash flow statement to be prepared using operating activities, investing activities, and financing activities. Under previous UK Generally Accepted Accounting Practice (GAAP) at FRS 1, dividends paid were disclosed in the cash flow statement under the cash flow classification of ‘equity dividends paid'. Smaller companies that choose to report under the small companies regime are encouraged, but not mandated, to report cash flow information. Parent companies should prepare a consolidated statement of cash flows that reflects the cash flows of the group entity.