Question

What does US GAAP say about the Statement of Cash Flows?

Name and define the building blocks of Ratio Analyses?

Name and define standards of comparison for analysis?

Answer 1

What does US GAAP say about the Statement of Cash Flows?

Scope:Although all entities are required to present a statement of cash flows, there are certain exceptions. Entities that are not required to present a statement of cash flows include defined benefit pension plans that prepare financial information in accordance with ASC 960, certain investment companies within the scope of ASC 946 that meet all of the conditions in ASC 230-10-15-4(c), and certain funds described in ASC 230-10-15-4(b)(3).

Comparative periods:Under ASC 230, presentation of comparative periods is not required.However, SEC Regulation S-X, Rule 3-02,requires that an audited cash flow statement be presented for the previous three fiscal years.

Definitions of cash and cash equivalents:The definitions of cash and cash equivalents in ASC 230-10-20 include cash and short-term, highly liquid investments. However, bank overdrafts are excluded from these definitions.

Classification in the statement of cash flows:ASC 230-10-45-10 requires that cash flows be classified and presented in one of three categories: operating, investing, or financing. ASC 230 provides more specific guidance than IFRS Standards on items to be included in each.

Name and define the building blocks of Ratio Analyses?

The first is liquidity and efficiency,the ability to meet short term obligations and to effectively generate revenues.

The second is solvency ,the ability genarate future revenues and to meet long term obligations.

The third is profitability ,the ability to provide financial rewards sufficient to attract retain financing.

The fourth is market ,the ability to generate positive market expectations.

Name and define standards of comparison for analysis.

The Auditing Standard Board set up the "Clarity Project" to aid in the rewriting of its standards to make it easier to read their standards ,easier to understand and to implement them.Charity Project was also set up to help develop the Generally Accepted Auditing Standards.so as to improve compliance the standard requirements.The IASSB also established a clarity project to develop internal auditing professions.standards in 2009 .After the establishment of a clarity project by ASB and IAASB it leads to the rewriting of their standards major chnages being that each standard will contain an ojective so as to help the auditor to know what is meant to achieve.