The ASC 230 guidance for the statement of cash flows includes the following language in paragraph 230-10-45-25:<\/p>\n
In reporting cash flows from operating activities, entities are encouraged to report major classes of gross cash receipts and gross cash payments and their arithmetic sum\u2014the net cash flow from operating activities (the direct method). (Paragraphs\u00a0230-10-55-1 through 55-4<\/a>\u00a0and paragraph\u00a0230-10-55-21<\/a>, respectively, discuss and illustrate a method by which those major classes of gross operating cash receipts and payments generally may be determined indirectly.)<\/p>\n Although the direct method is the \u201cpreferred\u201d method, very few companies present the direct method.\u00a0The reasons behind use of the indirect method, where net income is reconciled to cash from operating activities, generally go back to system issues and information availability.\u00a0 (And, if a company uses the direct method they are still required to present indirect method information.)<\/p>\n Erie Indemnity, a very unique company that provides service to an \u201cinsurance exchange\u201d has a robust approach to reporting and a 10-K filled with good examples.\u00a0 One of the most interesting examples is that they use the direct method when presenting their statement of cash flows, one of very few companies that use this method.<\/p>\n You can find their annual report here<\/a>, and the statement of cash flows is on page 45.<\/p>\n As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":" The ASC 230 guidance for the statement of cash flows includes the following language in paragraph 230-10-45-25: In reporting cash flows from operating activities, entities are encouraged to report major classes of gross cash receipts and gross cash payments and their arithmetic sum\u2014the net cash flow from operating activities (the direct method). (Paragraphs\u00a0230-10-55-1 through 55-4\u00a0and … Continue reading Have You Ever Seen the Direct Method Statement of Cash Flows?<\/span>