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Cash Flows - I - NBA 500 Intermediate Accounting Mark W...

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Unformatted text preview: NBA 500: Intermediate Accounting Mark W. Nelson CASH FLOWS I Discussion of the indirect method for presenting a statement of cash flows. Basic idea: reconcile net income to cash from operations, and reconcile cash from operations, investing and financing to change in cash balance. In theory, this statement should reconcile the change in the cash balance on the balance sheet with the changes in all of the other balances on the balance sheet. In practice, this simple reconciliation rarely occurs, because some events would appear twice. E.g., an acquisition shows up in the investing section as a cash outlay, so we shouldn’t include in the operations section any cash effects that we infer from changes in current asset and liability accounts that occur when the acquiree is consolidated with the acquirer. Special consideration must be given accounts receivable. There continue to be discussions of requiring the more informative direct-method statement of cash flows (see “Go Directly to Cash”), but it is unlikely that anything will happen soon. ...
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