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Statement of Cash Flows: issues for Financial Institutions


Project History

The EFRAG Short Discussion Series addresses topical and problematic issues with the aim of helping the IASB to address cross-cutting dilemmas in financial reporting and stimulating debate among European constituents and beyond.     

Statement of Cash Flows for financial institutions

The IASB is currently bringing forward its Disclosure Initiative project to improve and bring together the principles for determining the basic structure and content of financial statements. The Disclosure Initiative includes different work streams, one of which will address performance reporting. In this context, the IASB intends to consider possible improvements to IAS 7 Statement of Cash Flows.

The staff of the UK Financial Reporting Council (FRC) is working with the IASB Disclosure Initiative team, analysing general issues relating to cash flow statements and related disclosures. 

While EFRAG is aware that IAS 7 is an old standard that might require a revision, EFRAG acknowledges that financial institutions have questioned the usefulness of the statement of cash flows for a long time.   

In 2015, EFRAG issued a Short discussion paper to investigate if the business model of some entities is so fundamentally different that it should not only lead to a different classification of items (IAS 7 already requires entities to present their cash flows in a way that it is appropriate to their business) but also to a different configuration of the statement. It also examines alternative ways for these entities to provide information that achieves the objectives in IAS 7.

On 31 May EFRAG published feedback statement describing the main comments in respones to the discussion paper.

Respondents shared concerns about the relevance of the statement of cash flows for financial institutions and thus were supportive for the EFRAG’s proactive initiative. However, views diverged between those constituents who support focused improvements to the existing statement and those who believe a more fundamental revision is needed. 

Having considered the comments received EFRAG decided to continue with the project, with a focus of better understanding how the current information is used and on reviewing the current liquidity risks disclosure practices by banks, including those focused on sources and uses of funds.

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